Strong US employment report: 162,000 jobs added to the market in August - well above expectations

The US labor market strengthened significantly in August and surprised analysts, as 162,000 jobs were added to the economy outside the agricultural sector — well above the economists' forecast of 53,000 jobs. This was announced today (Friday) by the US Bureau of Labor Statistics (BLS).

The job growth in August represents a change from the trend of slowing hiring recorded in previous months and was the strongest recorded since March. According to the employment report, the unemployment rate in the US stood at 4.1% in August, similar to the previous month and in line with forecasts.

The pace of employment growth weakened in recent months after strengthening in the spring, partly against the backdrop of rising oil prices, supply chain disruptions, and the extensive tariffs imposed by the Donald Trump administration. Despite the sharp surprise to the upside in the number of jobs, the report is consistent with the picture that Federal Reserve officials have described recently as a "stable labor market."

Following the data, attention is expected to shift now to the inflation data to be published next week, which may be the final deciding factor ahead of the Fed's interest rate decision in less than two weeks. Against the backdrop of the strong figure, economists had expected in advance a recovery in employment in the local government education sector, after 49.6 thousand jobs were lost there in July. The decline in July was attributed in part to the seasonal effect of the summer months, and therefore the assessment was that part of it would reverse in August and support the total number of jobs.

The report comes as investors are looking for signals regarding the upcoming Federal Reserve interest rate decision. Yesterday, Federal Reserve Board member Christopher Waller said he is "inclined" to support keeping the interest rate in the current range of 3.5%-3.75% in the decision to be published on September 16.

Following Waller's remarks, traders reduced the probability they assign to a 0.25% interest rate hike at the upcoming Fed meeting. According to CME's FedWatch tool, the probability stood at 50% this morning, compared to 63% before the board member's remarks. After the publication of the US employment report, the probability of an interest rate hike at the upcoming decision stands at 52.6%.