Instant View: U.S. August payrolls rise slightly more than expected

NEW YORK (Reuters) - U.S. job growth rose slightly more than expected in August and the unemployment rate ticked lower, giving the Federal Reserve enough cushion to stay on its aggressive rate hike path as it tries to tame inflation.

Nonfarm payrolls increased by 315,000, the Labor Department's employment report showed on Friday. July was revised modestly lower to show payrolls rising by 526,000 instead of the previously reported 528,000. Economists polled by Reuters had forecast 300,000 jobs added last month.

Employers increased wages at a slower pace last month. Average hourly earnings increased 0.3% in August after gaining 0.5% in July. That kept the year-on-year increase unchanged at 5.2%.

MARKET REACTION:

STOCKS: After being roughly flat before the report, S&P e-mini futures rose sharply, last up 0.6%

BONDS: The yield on 10-year Treasury notes initially jumped before pulling back and was last up 0.2 basis points to 3.267%; The two-year U.S. Treasury yield, was down 4.8 basis points at 3.474%.

FOREX: The dollar index weakened and was last down 0.265% at 109.280

COMMENTS:

BRIAN JACOBSEN, SENIOR INVESTMENT STRATEGIST, ALLSPRING GLOBAL INVESTMENTS, MENOMONEE FALLS, WISCONSIN

"Neutral job gains would be close to 100,000 and we're still printing numbers in excess of that. But things are cooling from very hot levels. It's directionally a good report with the increase in the labor force participation rate, but it's a long distance to the destination the Fed is steering towards. Labor numbers are not very timely and not very reliable, so they're horrible indicators to use to steer an economy, but that's the way the Fed wants to drive so we just have to buckle up and ride along."

PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK

"We added just a bit more jobs than consensus but it was basically inline."

"Hourly wages - that was a good number, better than expected - and the participation rate moved up."

"The bottom line is even though job creation is still solid, the fact is unemployment is moving up and the participation rate is moving up. That's a sign we that we're going to see weaker reports ahead. Hourly wages have probably peaked."

"The markets are going to like this data. It's not too hot nor too cold. This report indicates the Fed is going to raise interest rates by half a percentage point this month, the reason being is that wage inflation seems to have peaked."

"The jobs market is heading for a real cool-off period."

"There were no major surprises. The only real surprise was the unemployment rate."

DAVID PAGE, HEAD OF MACROECONOMIC RESEARCH, AXA INVESTMENT MANAGERS

"The basic message is the labor market might be starting to cool and the Fed might not have to move so aggressively. That's what markets are really worried about, so we are seeing some easing of that."

"Some signs of a labor market that's coming back towards something that's sustainable, something that the Fed could live with. All of that suggests to us that the Fed will see some easing in the labor market, which is, of course, what they're trying to achieve in terms of slowing activity, and that probably means they can afford to move by just 50 basis points in September."

"We can see the Fed is at the beginning of the end in terms of tightening. Clearly huge developments in the labor market are fundamental here and the market is seemingly reacting to that. The drop in the two year yields, reflects some easing back of the more aggressive thoughts we've seen in recent weeks post Jackson Hole."

CHARLIE RIPLEY, SENIOR INVESTMENT STRATEGIST, ALLIANZ INVESTMENT MANAGEMENT, MINNEAPOLIS

"Today's jobs report is a market happy report. The headline number was slightly above estimates. Wages were largely in line. The big thing in this report was the participation rate going up."

    "More people participating in the labor market is a good sign. We've seen it pretty depressed since the pandemic."

    "Overall I don't think it changes the hand for the Fed as it goes into the September meeting, 75 basis points is still on the table.'

    "The more important report coming up is CPI and that's really going to determine how aggressive they need to be going into the end of the year."

    "Stock futures are up and the curve is steepening a bit. It's not enough to determine what the Fed's going to do in September. It's not a strong enough report to signal a more aggressive Fed at this point but it's not weak enough for the Fed to let off the gas pedal."

(This story has been refiled to remove extraneous word in first paragraph)

(Compliled by the global Finance & Markets Breaking News team)

By Chuck Mikolajczak