August Payrolls Blow Past Forecasts; Markets Lift Fed September Hike Odds

U.S. equity futures edged higher early Sept. 4 as investors waited for the Bureau of Labor Statistics to publish the August employment report at 8:30 a.m. ET. The release quickly reset expectations: nonfarm payrolls rose by 162,000 in August, about three times what economists had expected. Forecasts had largely centered on roughly 53,000 to 56,000 new jobs, a number already seen as a rebound after July's weak showing. The August print not only cleared that bar, it decisively outpaced it. July's headline was also rewritten. The prior estimate showed payrolls falling 23,000, but the latest report revised July to a gain of 21,000, turning a contraction into an expansion. The unemployment rate was unchanged at 4.1% in August, in line with expectations. Before the data, futures trading was subdued: Nasdaq 100 contracts were up about 0.4% to 0.5%, S&P 500 futures hovered near flat around +0.03%, and Dow futures were slightly negative. That tone shifted as traders weighed what stronger job growth could mean for the Federal Reserve's mid-September meeting. After the payrolls release, the implied probability of a Fed rate hike in mid-September jumped to about 59%. Treasury yields rose, pressuring bond prices and weighing on growth stocks, as higher yields reduce the present value of long-dated earnings. In that context, the immediate post-release reaction in index futures turned mixed to lower, despite the strong headline. The Nasdaq 100 remains especially sensitive to moves in yields because growth-oriented technology shares depend heavily on profits expected further in the future. Markets also focused on the scale of the July revision. While payroll revisions are common, changing a 23,000-job decline to a 21,000-job gain represents a 44,000-job swing, materially improving the two-month trend compared with earlier readings.