US Jobs Smash Wall Street Forecasts As Trump Demands Lower Interest Rates

The U.S. economy added 162,000 jobs in August, almost three times Wall Street forecasts, delivering a sharp labor-market rebound as Donald Trump intensified pressure on the Federal Reserve to lower interest rates.

Nonfarm payroll growth comfortably exceeded the 55,000 jobs forecast in a Bloomberg poll. The unemployment rate held at 4.1%.

Trump seized on the figures to renew his campaign for cheaper borrowing, arguing that a stronger U.S. economy should command lower rates rather than higher ones.

“Great jobs number just announced, breaking all estimates (except mine!) by double and triple, and you haven’t seen anything yet!” Trump wrote on Truth Social.

Markets Price Greater Risk of a Hike

The data pointed in the opposite direction for investors assessing the Fed’s next move.

Treasury yields rose, and U.S. stock index futures fell after the release as traders increased the probability of a quarter-point rate increase at the Fed’s September meeting from 50% to about 60%.

The two-year Treasury yield, which is sensitive to monetary policy expectations, climbed 0.04 percentage points to 4.38%. The dollar gained about 0.2% against a basket of major currencies.

Andrew Hollenhorst, Citigroup’s chief U.S. economist, said the report strengthened the position of officials focused on inflation.

“On the margin, this report favours the Fed hawks,” he said. “It keeps the labour market off the table as a concern and keeps the focus on inflation.”

Trump Pushes for Lower Borrowing Costs

Trump argued that the strength of the U.S. economy justified dramatically lower interest rates.

“A STRONG COUNTRY MEANS A LOWER INTEREST RATE - IT’S A BETTER CREDIT…Very simple!” he wrote.

He also threatened to restrict trade with countries running surpluses with the U.S. if the Fed did not lower rates, describing that approach as preferable to tariffs.

The president said high borrowing costs placed the U.S. at an unfair disadvantage and called on the Fed board to act.

His demand comes as the latest employment figures give policymakers more room to prioritize inflation rather than weakness in the labor market.

July Weakness Reversed

The August gain marked a sharp recovery from July.

Payrolls increased by 21,000 that month after revisions erased an earlier estimate showing a loss of 23,000 positions.

Leisure and hospitality led the August rebound after steep declines in June and July.

Manufacturing employment posted its largest increase since 2023, while construction added the most jobs since January.

Local government education employment rose by about 42,000 following unusually large cuts in July.

Financial activities and information, two sectors viewed as particularly exposed to AI-related displacement, lost a combined 34,000 jobs.

Labor Market Shows Broader Resilience

The labor force participation rate edged up to 61.6%, its first improvement in almost a year.

Participation among people aged 25 to 54 was unchanged at 83.4%.

Average hourly earnings increased 0.3% from July and 3.1% from a year earlier, the slowest annual pace since 2021.

Average hours worked nevertheless climbed to their highest level in more than two years, supporting weekly pay.

Fed chair Kevin Warsh last week described the labor market as “quite stable” and “consistent with full employment.”

The August jobs report is the final employment reading before Fed policymakers announce their next rate decision on September 16.

Inflation will now take greater weight in that debate. The Fed’s preferred headline personal consumption expenditures measure stood at 3.7% in July, compared with its 2% target.

The August consumer price index report, due before the meeting, is expected to become the decisive data point for policymakers weighing whether to raise borrowing costs.