The Jobs Report Surprised To The Upside. Chances Of a Fed Rate Hike Edged Up.

Chances of a rate hike by the Federal Reserve edged up on Friday after the latest jobs report surprised to the upside.

According to the CME Group's Fed Watch tool, there is now a 52.6% chance of an increase, compared to 49.4% on Thursday. In contrast, chances that the central bank will keep rates unchanged now stand at 47.4%, compared to 50.6% yesterday. The scenario is still largely a toss-up.

The shift took place right after the Bureau of Labor Statistics showed that nonfarm payrolls gained 162,000 jobs last month, compared to the 53,000 expected by analysts. It is the largest increase since March.

BLS noted that employment increased mostly in "food services and drinking places and in local government education," while the information industry shed jobs.

The unemployment rate was unchanged at 4.1%, in line with expectations, as the labor force participation edged up to 61.6%. However, it remains 0.5 percentage points below January figures.

The figures stand in contrast with the latest report from ADP, which detailed earlier this week that private companies added 38,000 jobs last month, down from 46,000 in July and below analysts' expectations of 47,000.

The figure represents the slowest pace of job creation since January. "Manufacturing, professional services, and information shed jobs. Education and health care, construction, and leisure and hospitality all showed solid hiring," it detailed.

ADP Chief Economist Nela Richardson said pay growth shows where hiring is taking place. "To understand hiring patterns, you have to look deeply into where pay growth is accelerating, where it's slowing, and for whom," she said.

"Once-predictable wage growth has been overtaken by the complexities of demographic change, persistent inflation, and AI's effects on jobs," Richardson added.

Large companies employing more than 500 people accounted for most of the growth, adding 34,000 jobs. Small and mid-sized ones remained largely flat.

ADP figures also showed that pay gains remained steady, and those staying in their jobs saw their base pay rise by 3% compared to the same month last year.