August jobs report should reinforce Fed keeping rates steady, managers say

Higher than expected job creation along with a slightly higher unemployment rate in August shows that the labor market continues to rebalance, said Candice Tse, managing director and global head of strategic advisory solutions at Goldman Sachs Asset Management.

"Broadly, the job market continues to show signs of moderation as the broader economy moves towards a soft landing, reinforcing market expectations that the Fed will keep interest rates steady at the September meeting," she said by email.

GSAM has $2.6 trillion in assets under supervision.

The U.S. economy created 187,000 jobs in August, above expectations and above July's downwardly revised figure of 157,000, the U.S. Bureau of Labor Statistics reported on Friday.

The unemployment rate rose to 3.8% in August from the 3.5% figure reported in July.

Economists had expected an increase of 171,500 jobs in August with the jobless rate at 3.5%, according to a survey by FactSet Research Systems, a financial data firm.

Bryce Doty, senior vice president and senior portfolio manager at Sit Investment Associates, also concurred that the unexpected rise in the unemployment rate in August may take pressure of the Federal Reserve to hike interest rates.

Sit Investment has $19 billion in assets under management.

The June jobs figure was also revised downward by 80,000, to 105,000. As a result, employment figures from June and July combined was 110,000 lower than previously reported.

For the past 12 months, the U.S. economy has created 271,000 new jobs per month on average.

In August, average hourly earnings edged up by 0.2%, while over the past 12 months, average hourly earnings have risen by 4.3%.

In August, job gains were seen in the health-care, leisure and hospitality, social assistance, and construction sectors, while employment in transportation and warehousing declined, the bureau added in the release.

Ms. Tse said that with U.S. economic data "remaining strong and the Fed providing greater clarity on the policy path forward, investors may find opportunities to generate alpha in both equities and fixed income."

The Federal Reserve will likely closely examine the August jobs report as they prepare to release their next monetary policy decision on Sept. 20.

As of Friday morning, according to CME Group's FedWatch tool, market participants' pricing of fed fund futures indicated there is an 93% probability that the central bank will hold rates unchanged at the next meeting, and only a 7% probability it will hike by 25 basis points.

The Fed's key short-term interest rate is now in a range of between 5.25% to 5.5%, after the central bank raised rates by 25 basis points at the July 26 meeting. The benchmark rate is now at its highest level since January 2001.