Employers added 162,000 jobs in August.
The market expected about 55,000.
Combined with expensive oil, that surprise put a September interest-rate hike back in play.
Strong Jobs Raise the Chance of a Hike
June and July were also revised up by about 55,000.
Unemployment stayed at 4.1%. Wages rose, but continued to lag inflation.
Strong employment gives the Fed less reason to support the economy with lower rates. Futures moved the estimated chance of a September hike from roughly the low-50s to about 58-65%.
A hike is possible again, but the decision is not settled.
Fed Governor Christopher Waller said he would lean toward holding rates if incoming inflation data continue to cool. The payroll report arrived a day later and rebuilt expectations for a hike.
Stocks, Treasuries, and the Dollar Reacted
Stocks fell after the jobs report:
- The Dow lost 0.5%.
- The S&P 500 fell 0.4%.
- The Nasdaq fell 0.3%.
Treasury prices also fell. Short-term yields rose, and the dollar strengthened.
Even so, the S&P 500 finished the week slightly higher.
Expensive Oil Makes the Decision Harder
Brent ended the week around $96. WTI finished around $91. Diesel reached a record.
The rise followed renewed U.S.-Iran fighting, risk around the Strait of Hormuz, and Ukrainian attacks on Russian refining.
Higher energy prices can bring more inflation pressure. That supports the case for higher interest rates.
The Fed now faces strong employment while inflation remains above its 2% target.
Inflation Data Come Next
PPI arrives Thursday. CPI follows Friday, with inflation expected near 3.4%.
The FOMC meets Sept. 15-16.
Cooling inflation would support Waller’s preference for holding rates. Strong jobs and higher energy prices pull the argument toward a hike.
Trump Is Demanding Lower Rates
President Trump is pushing in the other direction.
He demanded a rate cut and threatened to stop trade with countries where the United States runs a deficit if the Fed does not comply.
That puts White House pressure for lower rates against Chair Kevin Warsh’s inflation-first position.
Meta Paid to Avoid Zuckerberg’s Testimony
Mark Zuckerberg had been expected to testify under oath about harm Meta’s products cause children.
That testimony did not happen.
Meta agreed to pay up to $18 billion in fines. The case was brought by 29 state attorneys general in federal court in Oakland, California.
According to @pboyle, the agreement ended the expected courtroom questioning, and the public conversation stopped there.
Meta’s payment is a huge number. But the missing testimony matters too.