Evercore sees strong jobs data not altering Fed September call

Investing.com - U.S. nonfarm payrolls rose by 162,000 in August, exceeding expectations and marking a substantial rebound from July's weak reading, according to data released Friday. The unemployment rate increased by 5 basis points to 4.14%, while the labor force participation rate climbed 0.2 percentage points to 61.6%.

The payroll gains reflected a rebound in leisure and hospitality, which added 62,000 jobs, and local government education, which contributed 42,000 positions, as both sectors normalized after recent declines. Healthcare and construction also showed continued strength. After upward revisions to June and July, the three-month average of payroll growth stands at 71,000, up from 20,000 prior to Friday's report.

Goldman Sachs estimates the underlying pace of job growth based on the payroll and household surveys now stands at 53,000, compared to 5,000 before the report. Household employment increased by 569,000, while the size of the labor force grew by 683,000. The labor force participation rate now stands 0.5 percentage points below the January level when benchmark revisions took effect.

Evercore said the payroll gains strengthen confidence the labor side of the economy could withstand a possible Federal Reserve rate hike but are not a gamechanger for the September rate decision. "Next week's inflation data will still drive the hold vs hike decision, though payroll strength could tip the decision if that data breaks right on the cusp of the hold / hike divide," Evercore said.

Employment strength, if sustained, would more plausibly exercise a stronger influence on Fed policy setting on a December-type horizon, according to Evercore. The firm noted that Friday's report was the third of four consecutive days where the key daily release concerns the labor market, following Tuesday's JOLTS data and Wednesday's ADP private employment tally for August.

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