Healthy US labour market gives 'further ammunition' to Fed hawks

Last week's very strong labour market report showed robust job creation and a rising participation rate, pushing the alleged AI jobs apocalypse further into the future. A net 162k jobs were added in August, not only well above the median estimate but comfortably above even the top-end projections.

The sharp pick-up in hiring suggests the labour market isn't just refusing to cool - it's actively gathering pace, and there is certainly nothing in the data that would, in isolation, dissuade Fed officials from tightening policy further. A healthy labour market gives further ammunition to the hawks on the Federal Reserve.

However, relentless political pressure from the Trump administration to keep rates low - including another extraordinary outburst on Friday threatening to halt trade with countries running deficits with the US unless the Fed lowers rates - suggests to us that the FOMC will vote again to hold rates steady.

Warsh's equivocations only add to that view, barring an unlikely nasty surprise in this week's inflation report. This is currently our main point of disagreement with how markets are pricing monetary policy worldwide.