U.S. August Nonfarm Payrolls Beat Expectations, But Reliability Questioned
U.S. nonfarm payrolls for August rose by 162,000, far exceeding the market consensus of a 55,000 increase. July's figure was also revised up from a decline of 20,000 to a gain of 2,000. The labor force participation rate edged up to 61.6% from 61.5%, slightly above expectations. By sector, leisure and hospitality saw the largest job gains, with government adding 35,000 and goods-producing industries adding 40,000, while the IT sector, which is exposed to AI-driven disruption, shed 20,000 jobs.
The unemployment rate held steady at 4.1% from the prior month. The rise in leisure and hospitality employment was attributed to the effects of the North American World Cup and the summer peak season. Average hourly earnings rose 3.1% year-on-year, falling short of inflation, which drew criticism that real wage improvement remained limited.
With employment data deviating sharply from market expectations for three consecutive months, questions have arisen about the reliability of the statistics themselves. Last month's release came in about 80,000 below expectations for a negative surprise, while this time it came in roughly 110,000 above expectations in the opposite direction. As a result, the market's focus appears to be shifting away from the employment report and toward this week's August Consumer Price Index (CPI) release.
The Federal Reserve has maintained a hawkish stance on price stability, and with employment coming in hotter than expected as well, the probability of a rate cut has actually declined ahead of the September FOMC meeting. According to FedWatch, the rate-cut probability, which had risen to as high as 70% last week, fell to around 59.4% following this release.