August Hiring Blowout Puts Inflation—and the Fed—Back on Edge

August Hiring Blowout Puts Inflation—and the Fed—Back on Edge
After a lackluster summer for hiring, U.S. employers delivered a sharp reversal in August, adding 162,000 jobs while unemployment held at 4.1%. The result was described as a labor-market bounce that ended the weak stretch “with a bang.”

The Bureau of Labor Statistics report, released Friday, far exceeded the 53,000-job increase economists surveyed by Dow Jones had expected. It marked the strongest monthly gain since March, while revisions turned July’s previously reported loss into a 21,000-job gain and lifted June’s increase to 31,000.

The breadth of the gains reinforced the upbeat reading. Restaurants and bars added 59,000 jobs, government education rose by 42,000 and manufacturing added 16,000. The household survey showed employment up 569,000 and the labor force up 683,000, allowing unemployment to remain steady even as participation increased. Chris Rupkey of Fwdbonds called it evidence that “the labor market is alive and well.”

But the report also revived the central question confronting the Federal Reserve: whether labor-market strength will sustain inflation above its 2% target. Average hourly earnings rose 0.3% in August and 3.1% from a year earlier, while short-term Treasury yields jumped and markets increased their attention to a possible rate rise at the Sept. 15-16 meeting.

The White House took the opposite view. President Donald Trump hailed a “great jobs number” while urging the Fed to cut rates rather than raise them. For investors, however, the next verdict will come from producer- and consumer-price reports due Thursday and Friday. As Morgan Stanley’s Ellen Zentner put it, cooler inflation could let the Fed discount “potentially inflationary signals coming out of the labor market.”

Continue reading https://foxvector.com/stories/01a06db6-6537-2af1-7251-3d56022f62cf