Fed seen as done with rate increases after latest jobs report

US employers added more job gains than expected last month, but underlying numbers point to expectations that the Federal Reserve could be done with raising interest rates.

Employers added 187,000 jobs in August, after projections of 170,000 by data firm FactSet.

While the headline employment figure showed a resilient labour market, Friday's report showed signs of softening at a steady pace. It is positive news for the Fed, which has raised interest rates 11 times since March 2022 to curb inflation.

The unemployment rate ticked up from 3.5 per cent to 3.8 per cent, which is still historically low. Wage growth rose 0.2 per cent month-on-month, its lowest gain since last year.

Meanwhile, July's report was revised down from 187,000 jobs added to 157,000. June was also sharply revised down to 105,00 from 185,000.

The softening largely has not come at the expense of layoffs, still near a historic low.

“Remember, some experts said to get inflation under control we needed higher unemployment and lower wages,” President Joe Biden said in remarks from the White House Rose Garden.

“But I never thought that was the problem.”

Rather, companies are posting fewer openings.

The Labour Department reported earlier this week that vacancies fell to 8.8 million in July, the lowest number since 2021. The quit rate also remained low, with workers less confident they can find a job elsewhere.

This bolsters hopes that the Fed can achieve its desired “soft landing”.

By raising interest rates to its current 5.25 to 5.50 per cent target range, the Fed has attempted to slow the economy without driving it into a recession.

But although inflation has steadily fallen to 3.2 per cent since a 9.1 per cent peak last year, economic growth remains strong.

The nation's economy grew 2.1 per cent last quarter and consumer spending surged in July, meaning it probably grew again in the third quarter this year.

Fed Chair Jerome Powell has warned the central bank may not be done raising interest rates, arguing more proof is needed to show a cooling economy.

Still, a majority of traders believe the Fed is done with its rate increases. More than 90 per cent anticipate the Fed will keep rates steady after its September 19-20 meeting.

Nearly 60 per cent per cent anticipate rates will be unchanged by the end of the year, data from the CME Group shows.