3 Key Signals for Investors to Watch

Our focus this week takes a closer look at key economic reporting over the past week, especially as markets navigate volatility and look to next week's Fed rate decision on Wednesday. We begin with a stronger-than-anticipated jobs report from last Friday.

Key Takeaways from August's Employment Report

The U.S. economy added jobs at a brisk pace in August, reversing a summer slowdown in hiring, while the unemployment rate held steady. Nonfarm payrolls rose a seasonally adjusted 162,000 for the month while the unemployment rate, as expected, held steady at 4.1%, the Bureau of Labor Statistics reported last Friday (9/4). Economists surveyed by Dow Jones had been looking for a payrolls increase of 53,000. August’s total was the strongest monthly gain since March. Here are the key takeaways:

• Jobs growth surged to 162,000 in August, topping all estimates in a Bloomberg survey, and the unemployment rate held steady at 4.1%.
• The participation rate—the share of the population that is working or looking for work—edged up to 61.6% in August, marking the first improvement in nearly a year.
• Notably, there were upward revisions for both June and July—a net extra 55,000 jobs than were counted in the first place.
• The advance in payrolls was led by a rebound in leisure and hospitality employment and government jobs. Manufacturing payrolls rose the most since 2023, while construction firms added the most jobs since January.

The jobs data was a surprise as some analysts argue the 4.1% unemployment rate looks better than the underlying picture. Immigration policy has shrunk the available workforce, participation has fallen, the government is shedding jobs, and wage growth has been unimpressive. Nonfarm payrolls is a volatile series best read smoothed, but a shrinking labor force eventually means fewer people buying things, which could become a growth question, not just a jobs question.

Oil Prices Move Above $100 as Middle East Tension Heightens

Crude oil prices jumped 4% yesterday as the market braces for a prolonged war in the Persian Gulf after fighting between the U.S. and Iran intensified this week. Escalating conflict in the Persian Gulf has renewed concerns about global energy supplies. Brent crude (the international benchmark for oil prices) rose above $105 per barrel this week. The latest increase reflects growing concern that a prolonged conflict could disrupt shipping routes, reduce available supply, and potentially threaten energy infrastructure across the region.

For investors, oil above $100 is an important development to watch. Sustained higher energy prices can translate into higher gasoline, transportation, and production costs, potentially putting renewed upward pressure on inflation and squeezing both household budgets and corporate profit margins. Higher inflation could also complicate the Federal Reserve's path toward lower interest rates. While energy stocks may benefit from higher oil prices, a prolonged surge—particularly if crude approaches or exceeds $120 per barrel—could become a broader headwind for economic growth, consumer spending, and financial markets.

PPI Reporting

U.S. wholesale prices rose in August, according to a report yesterday that could play a key role in the Federal Reserve’s upcoming interest rate decision. The producer price index (PPI), a measure of final demand costs for goods and services, increased a seasonally adjusted 0.4% for the month, in line with the Dow Jones consensus, the Bureau of Labor Statistics reported.

On an annual basis, that put the PPI at 5.4%, still well above the Fed’s 2% inflation target and 0.1 percentage point higher than expected. The PPI rose 0.1% in July, a slight upward revision from the original estimate of no change. Excluding food and energy, the core PPI accelerated by 0.2%, against the forecast for a 0.3% increase. Core less trade services, another volatile category, was up 0.3%, in line with estimates.

Key Takeaways

Strong employment gives the Fed room to fight inflation. With unemployment holding at 4.1% and job creation stronger than expected, policymakers have less reason to worry that a modest rate increase would significantly weaken the labor market. At the same time, renewed inflation pressures—particularly from energy and producer prices—have increased concerns that inflation could remain above the Fed’s target. Together, these developments have increased the possibility that the Fed will raise rates next week.

The odds have risen substantially. Following yesterday's PPI report, fed-funds futures were indicating roughly a 70%–74% probability of a 0.25-percentage-point rate increase next week, although those probabilities can change quickly. 

One major piece of the puzzle remains: August CPI, scheduled for Friday. Expectations are particularly high because a hotter-than-expected consumer inflation reading could strengthen the case for an immediate September hike, while a softer reading could give policymakers reason to wait.

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