Jobs surprise: U.S. economy added 528,000 jobs in July; CPI print coming next week

What recession? The good news: A much stronger than expected reading on July employment came in hot. The U.S. economy added 528,000 jobs in July, the Labor Department reported, far exceeding the 258,000 consensus estimate. The unemployment rate ticked down to 3.5% from 3.6%, while average hourly earnings climbed 15 cents, or 0.5%, to $32.27. This unemployment rate marks the lowest since February 2020.

The bad news: The strong reading reinforced expectations for the Federal Reserve to keep aggressively raising interest rates in its bid to rein in inflation. The data triggered a sharp rise in U.S. Treasury yields and a selloff in stock-index futures that translated into a sharply lower opening in cash trading as investors priced in prospects of further sizeable rate hikes by the Federal Reserve.

Further, sharp falls in commodity prices, including oil, meanwhile, have helped to reinforce ideas that inflation is near a peak.

Fed-funds futures traders priced in a 69.5% chance of a 75-basis point rate hike in September, up from 34% on Thursday. Traders see a 30.5% probability of a 50-basis point move when the Fed next meets on September 20-21. The economy is clearly in relatively strong shape, as Friday’s job report shows growth across all sectors. Our Tom Lee, Head of...

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