August jobs data tops estimates as Trump presses the Fed

President Donald Trump reacted Friday to the hotter-than-expected August nonfarm payrolls report by threatening to halt trade with countries running trade surpluses with the U.S., unless the Federal Reserve lowers interest rates.

The U.S. economy added 162,000 jobs in August, nearly triple the consensus of 56,000, and July’s reported loss of 23,000 was revised to a gain of 21,000.

Food services and local government education accounted for about 62% of the total headline gain. “Great jobs number just announced, breaking all estimates (except mine!) by double and triple,” Trump said in a Truth Social post at 9:41 a.m.

ET.

Then came Trump’s demand: "Lower the rate or I’ll stop trading with countries with which we have a deficit.” Trump, Futures Market Draw Opposite Conclusions CME FedWatch now puts the probability of a hike to 3.75%-4% at the Sept.

16 FOMC meeting at 60.2%, up from 49.4% on Thursday.

The probability of a rate cut is 0.0%.

The 2-year Treasury yield spiked to 4.4%.

The Fed has a dual mandate covering maximum employment and price stability.

With payrolls running at five times the prior year’s 31,000 monthly average, the unemployment rate steady at 4.1%, and the workweek lengthening, the employment side of that mandate is not sending a distress signal.

That frees the central bank to concentrate on the other side, which remains a long way from target.

Headline PCE inflation ran 3.7% year-over-year in July and core PCE 3.3%, against a 2% goal.

Trump Puts Pressure on Fed Trump also wrote that a strong country means a lower interest rate because it is a better credit, and said the U.S. should have the lowest rate of any country in the world.

The post is among the most direct public pressure applied to the Federal Reserve since Kevin Warsh became chair.

The timing makes the message even more striking.

In his Jackson Hole speech last week, Warsh emphasized that monetary policy should respond to economic conditions rather than political pressure.

Warsh recommitted to the 2% inflation target and said elevated prices should be the central bank’s primary focus.

Read Also: Fed Rate Hike Bets Are Back: Is Warsh Turning Into an Inflation Hawk? Roach: ‘A Rate Hike Appears Likely’ Jeffrey Roach, chief economist for LPL Financial, said the report changes the September debate significantly. "Given the strength of the payroll report, a rate hike on September 16 appears increasingly likely," Roach said. "For the Fed, this data reduces plausible arguments against hiking," 22V Research economist Peter Williams said.

Charlie Ripley, senior investment strategist for Allianz Investment Management, sees another risk. "The consumer squeeze is already doing the work for the Fed," Ripley said.

His concern is that raising rates into an economy already facing pressure could push monetary policy too far.

What Happens Next Federal Reserve Governor Christopher Waller said Thursday he could support holding rates if inflation keeps improving, and would consider a hike if August prices run hot.

That report arrives Sept.

11 at 8:30 a.m.

ET, five days before the FOMC convenes.

Friday’s jobs report removed the labor market as an argument against tightening.

Next week’s inflation report decides whether the Fed acts on it.

At the last check, the Dow Jones Industrial Average fell 0.68%, and the S&P 500 declined by 0.5%.

The tech-heavy Nasdaq Composite dipped 0.02%.

On Thursday, the SPDR S&P 500 ETF Trust (NYSE: SPY ) and Invesco QQQ Trust ETF (NASDAQ: QQQ ), which track the S&P 500 and Nasdaq-100, respectively, closed higher.

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