According to the nonfarm payrolls report, the US economy created 162,000 jobs in August, significantly exceeding the expected +56K. The previous month's figure of -23K was revised upward to +21K, with a net two-month revision of +55K. June's figure was +57K.

The unemployment rate remained at 4.1%, matching both the forecast and the previous value. The unrounded unemployment rate rose to 4.1413% from 4.0900%. The labor force participation rate increased to 61.6% from 61.4%, while the U6 underemployment rate decreased to 7.7% from 7.9%.

Average hourly earnings rose 0.3% month-over-month, in line with the forecast, and increased 3.1% year-over-year against the expected 3.0%. Average workweek was 34.4 hours versus the expected 34.3. The Federal Reserve closely monitors the year-over-year earnings figure as an indicator of wage-driven inflationary pressure, and the slight upside surprise reinforced the solid tone of the report.

Private sector employment increased by 127K, significantly exceeding the forecast of +45K; the previous value of +30K was revised to +71K. Manufacturing employment rose by 16K versus the expected +5K. Government sector payrolls added 35K after the previous figure of -53K.

Before the release, fed funds futures priced in a 50% probability of a September rate hike and 32 basis points of hikes this year. USD/JPY was trading at 156.13, and S&P 500 futures were up 2 points.

The report turned out strong on the headline figure and triggered a significant demand for US dollars. The jump in the participation rate broke the recent trend and is what kept the unemployment rate at 4.1% rather than a lower level. A rising labor force participation rate is generally interpreted as a sign that people who previously remained on the sidelines of the labor market are returning to work, expanding the pool of available workers.

EUR/USD quickly fell to 1.1591 from 1.1623, but the clearest market reaction occurred in the bond market: yields on 2-year US Treasuries rose 7 basis points to 4.40% — a sign that the market views this data as inflationary. Two-year Treasury yields are particularly sensitive to expectations of near-term Fed policy decisions, which is why the move there was more pronounced than in currency pairs.

By sector, employment in education experiences seasonal fluctuations at this time of year: the sector showed +34K, offsetting July's figure of -58K. The leisure and hospitality sector rose by 62K, overwhelmingly driven by food service and drinking establishments. Healthcare and social assistance added 28.4K, a notable change.

As for the AI boom, the construction sector showed solid growth of 22K, while IT-related categories declined: computing infrastructure and data processing fell by 7.7K, publishing dropped by 6.7K, broadcasting and content lost 5.0K, and telecommunications shed 2.1K.

Upon closer examination, the 162K figure looks less impressive: approximately 34K came from education — particularly a reversal in local-government schools — and another 59K from restaurants and bars. These two areas alone account for about 93K of the 162K total. Both categories are characterized by lower wages and are subject to significant seasonal adjustments, meaning the underlying pace of job growth was weaker than the headline figure suggests. Whether the stronger participation trend and this sectoral mix persist will be evident from the September payrolls report and the Fed's next policy decision.

Source: ForexLive