Non-Farm Payrolls Exceed Expectations, Rate Hike in September Revived, Policy Divergence Between US and Japan Intensifies Bond Market Pressure

On September 7, the US added 162,000 non-farm jobs in August, significantly exceeding the market's prior expectation of around 56,000. Additionally, the employment data for June and July was revised upward by 55,000, indicating that the actual performance of the US labor market is more resilient than previously reported. The unemployment rate remained at 4.1%, with average hourly wages increasing by 0.3% month-on-month and 3.1% year-on-year. This suggests that while the job market is still in a low hiring environment, there are no signs strong enough to compel the Federal Reserve to quickly ease its policies. As a result, the policy discussion in September has returned to the combination of "high inflation and stable employment," thereby supporting the expectation of a rate hike.

However, this non-farm report is not without structural doubts. The new jobs were primarily in the food service and local government education sectors, while the information industry saw a reduction of 23,000 jobs, and the growth rate in healthcare jobs was below the average of the past year. At the same time, although the labor participation rate slightly increased to 61.6%, it has still declined by 0.5 percentage points since the beginning of the year. In other words, while the total non-farm figure is strong, it may not necessarily indicate a comprehensive recovery in hiring demand; rather, it could reflect a combination of partial industry recovery and a contraction in labor supply. Therefore, the upcoming CPI will still determine whether the Federal Reserve can truly convert strong employment into a reason for a rate hike, rather than relying solely on one non-farm report to define the entire policy direction.

Another variable facing the market comes from Japan. In August, Japan's overseas securities holdings decreased by $87.8 billion, closely approaching the approximately $98.6 billion scale of yen intervention during the same period. As a result, the market has begun to pay attention to whether Japan will sell overseas assets, including US Treasury bonds, to fund its interventions. If this speculation holds true, it will create a noteworthy financial chain: Japan selling dollar assets to support the yen may increase supply pressure on US Treasuries; on the other hand, expectations of rate hikes from the Bank of Japan may prompt funds to reduce yen carry positions. The simultaneous occurrence of both could amplify the volatility of the dollar, yen, and the global bond market.

Moreover, it is worth noting that the Federal Reserve's policies are also facing additional institutional pressures. The schedules of Bowman and Waller, who interacted with banking industry personnel before and after the FOMC's silent period, have been exposed. Although there is currently no evidence of regulatory violations, in the context of Trump’s ongoing calls for low interest rates and the US national debt reaching $40 trillion, the independence and credibility of the Federal Reserve are once again under market scrutiny. This means that the real core issue in September is not just whether to raise rates, but whether strong employment, sticky inflation, US Treasury supply, and the return of Japanese funds will collectively keep global funding costs elevated. If CPI continues to show resilience, expectations for rate hikes may further push up the dollar and US Treasury yields, compressing the liquidity space for overvalued assets and cryptocurrencies; conversely, if inflation cools in the future, the market may have the opportunity to lower its pricing on the duration of high rates.

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