U.S. employers added 162,000 jobs in August, according to the Labor Department, nearly triple the consensus forecast of 55,000 positions. The unemployment rate remained at 4.1 percent.
Following the release, CME FedWatch data showed the probability of a 25 basis point rate hike at the Federal Reserve's Sept. 16-17 meeting jumped to 60 percent from roughly 50 percent the prior day. The move sent the front end of the Treasury yield curve higher, repricing near-term rate expectations.
Food services led sector gains with 59,000 new positions. Public education added 42,000 jobs and healthcare contributed 13,000. The information sector shed 23,000 positions, reflecting continued weakness in white-collar employment.
Average hourly earnings rose 0.3 percent month-over-month and 3.1 percent year-over-year. The annual gain likely trails current inflation, constraining real wage growth.
The Labor Department also revised July's initial job loss into positive territory, and raised June figures, suggesting a more resilient labor market than previously reported.
Heather Long, chief economist at Navy Federal Credit Union, called the report "huge." Orphe Divounguy, chief economist at Quantitative Research Group, cautioned that "one month doesn't make a trend" while assessing the labor market as "steady — not strong, not collapsing."
Seema Shah, chief global strategist at Principal Asset Management, said "markets may edge up their expectations for a September hike following today's release, but next week's CPI report is still likely to be the key swing factor for policy." The inflation print arrives Sept. 11.
Federal Reserve Chairman Kevin Warsh last week signaled the need for additional action to combat inflation. Fed Governor Christopher Waller indicated Thursday he would favor holding rates steady if new data showed inflation improving, underscoring internal policy disagreement.
