Fed Rate Hike Odds Rise as US Job Market Surprises with Strong Growth

Stocks on Wall Street fell significantly after the release of a surprisingly strong jobs report for August, indicating that the Federal Reserve may raise interest rates later this month to combat inflation.

The Labor Department reported that employers added 162,000 jobs in August, far exceeding the forecasted 65,000. The unemployment rate remained steady at 4.1%. These numbers suggest a strong labor market, which could make it more challenging for the Fed to balance supporting job growth with fighting inflation.

Jeffrey Roach, chief economist for LPL Financial, believes that 'a rate hike on Sept. 16 appears increasingly likely.' The government will release August inflation figures on September 11, just before the Fed's policymaking committee meets and makes its decision. Inflation has been above 3% for most of the year.

Terry Sandven, chief equity strategist at U.S. Bank Asset Management Group, notes that while the jobs report does lean toward a rate hike, it is 'not a foregone conclusion.' Expectations for a rate hike in September increased to 60.4%, up from 49.4% on Thursday and 57% a week ago.