Strong Jobs Report May Prompt Fed Rate Hike, Fueling Inflation Concerns
1 source↑ Market-relevant
IN SHORT
A surprisingly robust jobs report, with upward revisions to previous months and significant gains in food services, could set the stage for a Federal Reserve rate hike. Investors are pricing in this possibility, which may also provide President Donald Trump with an argument for economic strength.
Key Numbers
4.1 percentunemployment rate unchanged
21,000July job additions (revised)
59,000August job gains in food services
3.1 percentannual wage growth
Who's Involved
Ryan Weldon
Investment director and portfolio manager at IFM Investors
Federal Reserve
Central bank potentially considering rate hike
President Donald Trump
President of the United States, potentially angered by rate hike
Labor Department
Agency that released the jobs report
↳ Why This Matters
The strong jobs report increases the likelihood of a Federal Reserve rate hike, which could impact borrowing costs and economic growth. It also provides President Donald Trump with data to support his claims of economic strength amidst global challenges.
Key facts
The Labor Department revised July job numbers upward, now showing a gain of 21,000 jobs.
August saw a surge in employment in food services and drinking places, adding 59,000 jobs.
Annual wage growth was reported at 3.1 percent.
The unemployment rate held steady at 4.1 percent.
The strong employment data could lead the Federal Reserve to consider a rate hike.
Market participants are factoring in a notable probability of a rate increase this month.
A robust jobs report, indicating unexpected strength in the labor market, could prompt the Federal Reserve to implement another interest rate hike. The report showed upward revisions to previous months' job gains and a significant increase in employment within the food services and drinking places sector. Wages also saw a notable increase over the past year, while the unemployment rate held steady. This data may give the Fed more latitude to raise rates if inflation does not show a convincing downward trend. Investors are already pricing in a considerable chance of a rate hike this month. While such a move could displease President Donald Trump, the strong economic data also provides him with an argument that the economy is resilient.
Frequently asked questions
The unemployment rate remained unchanged at 4.1 percent.
Employment in food services and drinking places saw the largest jump, with 59,000 new jobs.
Investors are pricing in a good chance of a rate hike this month.
July's job numbers were revised upward from an estimated loss of 23,000 jobs to a gain of 21,000.
What Happens Next
01Focus will be on next week's inflation print.
02The Federal Reserve will consider the jobs data for its next rate decision.