US nonfarm payrolls surge in August and contribute to Fed rate hike expectations

US Nonfarm payrolls unexpectedly surged by 162,000 in August, well above median forecast for 55,000 increase and against upwardly revised July figure to 21,000 from initially reported -23,000.

The same report showed that unemployment was unchanged at 4.1% (also in line with expectations), while average earnings, one of inflation indicators, eased to 3.1% y/y from 3.2% previous month.

Sharp and unexpected acceleration of job growth signals that the labor market started to gain momentum after a short-lived slowdown, driven by seasonal factors and so far limited negative impact from the war in the Middle East that lifted energy prices and caused disruptions in supply chains.

Upbeat August data add to prevailing view of stable labor market and contributes to growing expectations of Fed rate hike, in the policy meeting due later this month, following Thursday’s remarks from Fed Governor Waller who said that he would support scenario of keeping rates on hold if inflation shows signs of cooling that temporarily cooled expectations.

Markets await release of US Inflation report for August (due Sep 11) which is expected to provide crucial information to US policymakers ahead of Sep 16 FOMC policy meeting.