Hot Jobs Report Boosts Rate Hike Odds to 58%

The US labour market has defied expectations of a slowdown with a hot jobs report on Friday night. Employers added 162,000 jobs in August, more than three times the forecast in a WSJ poll of economists. The surprise result was driven by strong hiring in leisure and hospitality, local government education, manufacturing, and construction, while jobs in AI-exposed industries such as finance and information declined.

The US economy has added an average of 80,000 jobs a month this year, up from 10,000 a month last year. However, the unemployment rate held steady at 4.1% and average hourly earnings rose just 0.3%, the slowest pace since 2021.

Federal Reserve officials will likely see the result as evidence in favour of hiking interest rates, according to Bloomberg. US President Donald Trump argued the opposite in a post on Truth Social, saying interest rates should be lowered. 'The Fed Board, with its great new leader, must get smart, BE PATRIOTS for a change,' he wrote.

Markets reacted sharply to the jobs report. Two-year government bond yields spiked to 4.42% as traders boosted their bets that the Federal Reserve would hike interest rates this month. Investors now see a 58% chance that the Fed will raise rates, up from 52% before the hot jobs report.