04.09.2026 - Strong Jobs - Fed Challenge
The US labor market delivered a significant upside surprise in August.
Nonfarm payrolls jumped by 162’000, well above the consensus estimate of just 53’000, while the unemployment rate remained unchanged at 4.1%, in line with expectations.
August marked the strongest monthly job gain since March and represents a clear rebound from the slowdown seen during the summer months.
This comes just one day after markets rallied following comments from Fed Governor Christopher Waller, who indicated that he intends to vote against a rate hike in September.
The combination highlights the growing uncertainty around the Fed’s next decision.
Markets:
Equities: Mixed
Bonds: yields moving back higher after yesterday's drop - US 10y yield 4.78%, Japan 10y yield 2.91%
Commodities: Oil prices almost unchanged, WTI around USD 91/barrel and Brent around USD 96/barrel
Precious metals prices lower after yesterday's rally, gold at USD 4’430/oz, silver falls below USD 66/ozCurrencies: US dollar slightly higher - Japanese Yen falls again, USDJPY 156
Cryptos: - Bitcoin back below USD 80k
Volatility: The VIX index fell back below 15 (still good opportunity for hedging)
My View: With the labor market showing renewed strength, the Fed can increasingly focus on its main remaining problem: inflation.
A resilient labor market gives policymakers significantly more room to keep monetary policy restrictive or tighten further without having to worry immediately about employment.
That makes next week’s inflation data even more important.
If inflation remains elevated or surprises again to the upside, I see a September rate hike as a very realistic scenario, particularly after today’s strong employment report.
Investors remain almost evenly divided on the September decision, highlighting just how uncertain the outlook has become.
In my view, the combination of a resilient labor market and persistently elevated inflation continues to argue for tighter monetary policy rather than an early end to the Fed’s hiking cycle.
The next Fed meeting will be an important test of how independently the central bank can really act.
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