The Fed hikes rates! But the real story is that they likely aren't done

The Federal Reserve made it official yesterday - we are back in tightening mode.

The Federal Reserve raised interest rates for the first time in three years in a unanimous decision on Wednesday, with central bankers now seeing a second hike this year to arrest sticky inflation.

The Federal Open Market Committee voted to raise its benchmark interest rate to the range of 3.75% to 4% from 3.5% to 3.75%, the first rate hike since July 2023, as renewed tensions in the Middle East drive oil prices higher and raise concerns about broadening price pressures.

"We now have data broadly defined that says the economy has indeed strengthened," Fed Chairman Kevin Warsh said in a press conference following the meeting. "Underlying growth is higher. Inflation is the problem. Stable prices have been the problem for, now, more than five and a half years.

"So what the committee decided to do today was take an action to ensure a timely return to our price stability."

The ¼ point increase in the Fed Funds rate was expected. The bigger news is what Fed officials projected going forward for both rates and the economy as a whole. And once that information sunk in, Wall Streeters didn’t like it, with only half of those losses being recovered on Thursday.

So what freaked out Wall Street so much? It was a majority of Fed officials saying they are not one-and-done on rate hikes.

Most Federal Open Market Committee members see the need for at least one more 25 basis point rate hike this year, as 12 out of 18 members that submitted projections pegged their view of appropriate monetary policy in 2026 at an average of 4.125%.

That rate implies one more 25 basis point hike to come by year-end.

Four committee members see 50 more basis points' worth of rate hikes in 2026 as appropriate, while only two members see no more hikes this year — suggesting that the new effective target rate of 3.75% to 4% is adequate.

And that outlook was made because the Fed estimates inflation and the US economy as a whole to run hotter than what was expected 3 months ago.

Fed officials added that they expect unemployment to stay at or barely over 4% over the next 2 years. As we’ve found out in Trump 2.0, that doesn’t necessarily mean jobs will be added, but the lack of increases in the labor force and theft growth of productivity may be a trend that continues.

Another trend that seems to be continuing is Americans spending almost all of the money they make, which is also something that leans toward more rate hikes. On the morning of the Fed’s decision, the Census Bureau reported that retail sales had an especially strong August.

U.S. retail sales rebounded sharply in August as households boosted purchases of a range of goods while also spending more at restaurants and bars, reinforcing the economy's resilience even as consumers grow more anxious about high inflation.

The stronger-than-expected report from the Commerce Department on Wednesday prompted economists to upgrade their gross domestic product growth estimates for the third quarter. Inflation jitters were underscored by news of a surge in import ‌prices last month amid strong increases in the costs of capital and consumer goods….

"The pace of underlying consumer spending looks to be advancing at a healthy rate," said James McCann, senior economist at Edward Jones. "This should help​provide some reassurance around the resilience of the U.S. economy in the face of increasing short-term headwinds to growth, including higher interest rates, a renewed spike in oil prices, trade disruptions and waning support from tax cuts."

Retail​sales jumped 1.2% last month, the largest increase since March, after a revised 0.5% drop in July, the Commerce Department's Census Bureau said. Economists polled by Reuters had forecast ⁠retail sales, which are mostly goods and are not adjusted for inflation, would rebound 0.8% after a previously reported 0.6% drop in July.

Yes, some of that was due to the increase in gas prices that started in August, but retail sales also went up 1.1% if you take away gas stations, including a 1.2% increase at bars and restaurants, so Americans were still going out and spending as Summer wound down, even as consumers say they are increasingly gloomy.

The data so far shows a US economy that was still growing in Q3 2026, and the Federal Reserve sees the higher prices as the threat to the economy, and any slowdown would be as a result of spending not keeping up with the higher prices vs slowing down on its own. Of course, we’ll see if and when consumers stop accepting these higher prices, or if we higher interest rates bite back on an AI Bubble of investment that has heavily relied on debt as well as future revenues coming in to pay back that debt.

But on the spending and output side, nothing to worry about folks! At least until something comes along to change that situation.

More reasons behind the profit boom of 2026

We know that as prices went up after war broke out in Iran last February, so did profits and we recently got more evidence of that with a report from the Census Bureau on profits in manufacturing. In particular, check out this table.

So post-tax (seasonally adjusted) income for manufacturers went up by nearly 22% in 3 months, and nearly 647 in 12 months.

Part of that reason is the signing of Trump/GOP Tax Scam 2.0 in July 2025 and its related incentives. But another part is in that “cents per dollar of sales” – aka profit margins. Margins are up nearly 40% on a non-seasonally adjusted basis and over 42% on a seasonally-adjusted one.

Not surprisingly, much of the increase in manufacturing profit comes oil and gas, whose prices started rising after we started bombing Iran in late February 2026.

After-tax profits, petroleum and coal products, US
Q1 2026 $13.15 billion
Q2 2026 $54.14 billion (+311.7%)

But it’s not only fossil fuel companies making more in profit. Durable manufacturing also had a big boost in the Spring and early Summer.

After-tax profits, durable manufacturing, US
Q1 2026 $204.42 billion
Q2 2026 $254.65 billion (+24.6%)

Out of that $50 billion+ in added profits, around $8.5 billion of that was in aerospace products and parts, which is a volatile category of big-ticket items that don’t necessarily show a trend. But post-tax profits in the machinery sectors more than doubled between Q1 and Q2, up by more than $12.4 billion. We also saw more than $3.0 billion in added Q2 profit for primary metals (+36.8%), and nonmetallic mineral products had its profits go up by more than 158%, from $2.95 billion to $7.63 billion.

(I’m not going to say these companies are pocketing the difference from the end of Trump’s tariffs and not passing those savings onto customers and/or workers. But if you want to…).

Computers and electronic equipment make up the largest of US durable manufacturer profits measured, but only made up slightly more than $11 billion of the $50.2 billion in the added profits of Q2 2026. But that may be because that tech equipment sector already had its profit boom in 2025 and early 2026.

After-tax profits, computer and electronic products, US
Q2 2025 $68.69 billion
Q2 2026 $156.03 billion (+127.2%)

And yet information technologies have been laying people off in large amounts for the last couple of years. Yes, that’s not exactly hardware, but it’s also not unrelated, since you oten need IT services to run the items on this equipment, so that’s an interesting cross-current.

Manufacturers aren’t the only businesses who saw a jump in profits in Q2. It also looks like retailers had a big increase as well.

Seasonally adjusted after-tax profits of U.S. retail corporations with assets of $50 million and over totaled $112.3 billion, up $45.1 (±0.5) billion from the $67.2 billion recorded in the first quarter of 2026, and up $51.7 (±0.9) billion from the $60.6 billion recorded in the second quarter of 2025.

Seasonally adjusted sales for the quarter totaled $1,171.1 billion, up $28.5 (±5.0) billion from the $1,142.6 billion recorded in the first quarter of 2026, and up $88.7 (±10.5) billion from the $1,082.4 billion recorded in the second quarter of 2025.

So profits were up nearly $17 billion more than sales were at these large retailers. Hmmm….

And if you look at the non-seasonally adjusted figures, the difference in those retail profits is due to a $36.4 billion increase in Q2 in what’s ID’d as non-operating income.

So what is an example of this type of non-operating income? Here’s what Investopedia has to say about it.

If a retail store invests $10,000 in the stock market and earns 5% in a month, the $500 earned would be non-operating income. When a person sets out to analyze this retail company, the $500 would be classified as nonoperating, or non-recurring, earnings because it can't be relied on as continuous income over the long term.

Alternatively, if a technology company sells or spins off one of its divisions for $400 million in cash and stock, the proceeds from the sale are considered non-operating income. If the technology company earns $1 billion in income in a year, it's easy to see that the additional $400 million will increase company earnings by 40%.

To an investor, a sharp bump in earnings like this makes the company look like a very attractive investment. However, since the sale cannot be replicated or duplicated, it can't be considered recurring operating income and should be removed from performance analysis.

So this appears to be paper gains and accounting tricks by major retailers, more than profiteering. And it’s not sustainable in the long-term, but in a corporate environment of “make number go up”, boardrooms don’t really care about that.

And given that these companies rely so heavily on these large profit numbers to keep these stocks pumped up, I can’t see them cutting their inflated prices any time soon. And they clearly haven’t passed these higher profits onto workers, as we are in a multi-year low for average hourly wages on a year-over-year basis.

More proof that the economy in Summer 2026 was a nice situation if you’re a CEO or if you’re someone who lives off of wealth. But not so good if you’re a person with a real job that has to buy stuff and pay bills.

INFLATION WATCH! Will August's 0.4% be the "good old days" vs what's coming?

Many were waiting for Friday’s Consumer Price Index report, as prices of gasoline and other products had risen in much of America in August. And it was the last major economic report from the Bureau of Labor Statistics before the Federal Reserve makes their decision on interest rates next week.

Well, the report came out and…. inflation had yet to spiral.

The consumer price index rose a seasonally adjusted 0.4% for the month, putting the 12-month increase at 3.4%, the Bureau of Labor Statistics reported Friday. Both readings were in line with the Dow Jones consensus.

However, stripping out volatile food and energy prices, the core CPI posted a 0.3% monthly gain, or 0.1 percentage point higher than forecast. The core annual rate came in at 2.4%, matching the estimate.

Dig into the actual CPI report, and you’ll see that one reason prices didn’t go up by more than 0.4% overall was because grocery prices (aka – “food at home”) were flat in August after a 0.1% drop in July.

Doubly interesting is that a main reason behind the flattening in grocery prices comes from beef, whose prices that President Trump wants to cut even further with less safe and imported meat.

Change in prices, beef and veal
July -0.8%
Aug -1.0%
Aug 2025-Aug 2026 +5.9%

So is the BLS part about food prices BS? Or is the Trump Administration behind the curve of something that was already happening, and now will overcorrect and crash prices for American producers?

The CPI report came one day after the Bureau of Labor Statistics said that Producer Prices had risen at a similar rate.

The producer price index, 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…..

There were further signs of pipeline pressures: Processed goods prices increased 1.8% while unprocessed goods accelerated 1.1%.

But the increased costs at the start of the product pipe3line has yet to show up on store shelves, apparently.

Do I buy it? I’d say I’m confused by the disconnect where businesses keep reporting higher prices for the products they get, the costs of transport run higher, this is somehow not passed on much to the consumer, but profits go through the roof. Yes, some of that is theft using gains of increased worker productivity, but given the wide gap between prices only going up by 3-4% while profits and margins rise by double digits, it also seems to be something else that is not apparent in the data.

Even with inflation staying at 3.4% year-over-year, wage growth still was lower than that over 12 months, making year-long real earnings negative for the 3rd month in a row.

Everyday Americans certainly don’t think things are getting better, as consumer sentiment is back in the bad place it was when gas prices first spiked up this Spring.

The University of Michigan's Surveys of Consumers said its Consumer Sentiment Index dropped to 47.8 this month ⁠from 51.7 in August. Economists polled by Reuters had forecast the index at 51.0. Sentiment sagged among consumers identifying as Democrats and Republicans, but was little changed among Independents.

"With a resurgence in fuel prices and trade tensions, consumers anticipate greater pressures on their pocketbooks ‌to ⁠come," said Joanne Hsu, the director of the Surveys of Consumers.

The survey's measure of consumer expectations for inflation over the next year jumped to ⁠4.6% from 4.0% last month. Twelve-month inflation expectations were at 3.4% in February before the U.S.-led war with ⁠Iran started. Consumers' expectations for inflation over the next five years edged up 3.4% from ⁠3.3% in August. They are higher than their 2024 range of 2.8% to 3.2%.

By the time we get to the October surveys, a whole lot of Americans are likely to be notified of higher health insurance premiums, so I can’t imagine they’d be feeling better by that point. And with nationwide diesel prices rising to more than $6 a gallon (as it did on Friday), that'S going to be passed through to other products at some point, doesn’t it?

We might well look back to the 3.4% year-over-year CPI figure that was reported for August as a goal to fall back toward for 2027. And how much longer are Americans going to keep up their strong consumer spending when wages keep failing to keep up with those higher prices? Especially if the Bubbly stock market makes a correction back toward reality?

Higher gas prices, higher interest rates, and TrumpWorld flailing

As war in the Middle East goes past the 6-month mark with more bombs falling in September, the oil markets finally have admitted reality. Shorter supplies and uncertainties of future availabilities have caused oil prices to spike from less than $69 a barrel on the 4th of July to more than $97 after the close of trading in the week of Labor Day.

Gas prices being downstream of oil prices, it's no surprise that the average US gas price went back over $4 a gallon since the start of August and has not gone below it.

Up until today, Wisconsin had been protected from the jump in gas prices that much of the nation has dealt with over the last month. AAA tells us that regular gas prices went up by 14 cents a gallon between August 9 and September 8, but went down by 4 cents a gallon in our state.

But today, I noticed my local Kwik Trip posting at $3.99 a gallon, and sure enough, the average price of a gallon of gas statewide went up 16 cents today while the national price only went up by 7.

This now means average gas prices for both the US and Wisconsin are up by more than $1 a gallon vs September 2025.

The bond market also noticed that gas prices, other costs, and the US's deficits and debts aren’t going down any time soon. And bond yields have resembled the oil charts over the last 2 ½ months, with both the benchmark 10- and 30-year yields rising by more than 40 points without any change in interest rates from the Federal Reserve.

10-year note

30-year bond

Also today, the Treasury auctioned off $39 billion in 10-year notes to pay for more debt, and the median yield of those notes went from 4.63% in August to nearly 4.77% today. That followed $58 billion in 3-year notes that were auctioned off yesterday, which ended up with a median yield of 4.43% vs 4.24% for the same term and amount in August.

And what’s on the docket for auction tomorrow? It’s the 30-year bond. Uh oh….

It looks like the Trump Administration is getting a bit shook by these developments.

The Treasury Department on Wednesday said it will buy back up to $6 billion of government debt in an operation aimed at keeping bond markets functioning.

The much-anticipated announcement triples the normal buyback operation and follows an announcement Aug. 19 from Treasury Secretary Scott Bessent that the department would at least double the normal amount for already-issued securities….

“Moving the sizes up to $6 billion would amount to tripling the size of the buybacks, which would be a meaningful escalation but would not be wildly out of line with the spirit of the ‘at least double’ language.,” Wrightson ICAP analysts wrote earlier this week.

“Quadrupling or even quintupling the size to the $8 billion to $10 billion range is not out of the question, but would represent a second major shift in the Treasury’s debt strategy in just two weeks,” they added. “It would be an admission that the Treasury hadn’t thought through its hasty August 19 announcement in the first place.”

The actual buybacks will happen Thursday in a 20-minute operation that will conclude at 2 p.m. ET.

From what I can glean off the Treasury Department’s FAQ page on buybacks and the connected statute that buyback operations are under, this is done by

us[ing] money received from the sale of an obligation and other money in the general fund of the Treasury Department in making such purchases, redemptions, or refunds.

It’s the equivalent of spending more money on anything else, except it’s a direct payment to the banks and other bond holders that choose to take the cash instead of holding onto the US’s bonds.

We’ll see how many bondholders take up the US on this offer tomorrow, and what our government has to give up in order to make those exchanges. But I have a hard time believing these billions in Treasury dollars being sent out would lower our fiscal deficit or inflation, so beyond a short-term attempt to boost demand (and lower rates) for 10-year and 30-year bonds, this move won't solve the underlying economic problems. And likely means even more funds have to be made up for in the near future.

Oh, but don’t worry, because Bessent claims the US economy will grow by 3% at the same time that we cut spending, which will allow us to "grow our way out of" debt as an economic problem! How are we going to double our post-inflation growth while cutting demand and having higher interest rates restrict borrowing? DON'T ASK QUESTIONS, JUST BELIEVE IT!

The desperation from TrumpWorld is obvious and not fooling anyone. Even the coked-up finance bros are seeing through it.

State of Working Wisconsin - gaining ground, but higher earners are still behind

Wanted to mention a few things on the recently released State of Working Wisconsin report for 2026. It's put out by High Road Strategy Center at UW-Madison And on the wage-earning side, this report says Wisconsin was performin well by the end of year.

In 2025, Wisconsin’s median wage – $26.17 per hour – reached a new high (see W2). Workers in the state have experienced three years of solid wage growth that have more than made up for the damage to wages inflicted by the very high inflation of 2022. From 2022 to 2025, the inflation-adjusted value of wages grew by $2.00 per hour. Further, the current wage is $4.00 higher than the 2015 median. This advance in wages is unprecedented in the data we have. Real wage growth in the past decade is stronger than in any period back to 1979. The 2025 Wisconsin median wage slightly exceeds the national median (which is unusual but not unprecedented).

The long-term view provided by W2 shows how remarkable the last decade of wage growth has been. Wisconsin workers actually lost ground in the 1980s with wages falling to well below the national median. Wisconsin began to make up the wage loss and finally got ahead of the 1979 median wage toward the end of the growth of the 1990s.

In the early 2000s, wages were stagnant, and the Great Recession brought wages to the 21st century’s low point in 2012. Wages grew slowly from 2012 until 2018 during the sluggish recovery from the Great Recession.

Since 2018, however, wage growth has been strong. While high inflation in 2022 brought wages down, wages grew in 2023, 2024, and 2025, and in each of the last two years, Wisconsin has reached a record high.

I did find it interesting that the report had data showing Wisconsin with slightly higher wages vs the rest of the country at the 20th and 50th percentiles, but trailing when it comes to higher-paying jobs.

This goes along with the recent “brain drain” report from the Wisconsin Policy Forum, which showed college-educated Wisconsinites frequently going to higher-paying states like Minnesota, Illinois and California.

That said, while we still lagged behind in 2025, higher-paid workers in Wisconsin have gotten stronger wage gains (by percentage) than the rest of the country over the last 6 years.

But these increased wages in recent years haven't necessarily made it easier for Wisconsinites when it comes to paying their bills and/or getting ahead. The High Road report mentions that times are still tough for many Wisconsinites, as their everyday costs are outpacing whatever their incomes may be going up by. And it may well get worse in the near future.

To provide a picture of issues around affordability, we draw on Wisconsin data from United for ALICE. This United Way project identifies the ALICE (Asset Limited, Income Constrained, Employed) in each state. The ALICE Household Survival Budget includes only essential expenses, such as housing, food, transportation, child care, health care, technology, and taxes. The ALICE standard is more conservative than other basic budget standards. (See EPI’s Family Budget Calculator and the MIT Living Wage Calculator for alternative models of the disconnect between wages and costs of living).

The ALICE standard shows that more than one-in-three households in Wisconsin (35% of households) faced financial hardship. Of these households, 11% were below the federal poverty line, another 24% of the state’s households earned more than the poverty-level but still faced considerable financial hardship and did not earn enough to afford a minimal cost of living. This kind of struggle – working people who do not earn enough to make ends meet – is a long-standing problem for working people in the state. Between 32-35% of Wisconsin families have faced financial hardship since 2010….

As energy, food, and housing prices rise, families feel increasingly squeezed. Recent analysis shows that utility bills are growing rapidly: Wisconsin households are paying 19% more today than they were in 2022. The federal approach to tariffs has increased costs for families by $1,100 per year according to the Budget Lab at Yale. The federal budget cuts for health insurance, Medicaid, and food assistance are making life more expensive for working families across Wisconsin. Many of the biggest cuts to Medicaid are yet to come.

Which should tell you that while it's nice that Wisconsin was outpacing the country's wage growth in 2025, it wasn't necessarily translating into a better life. And we know prices have gone up more while wage growth has gone down in 2026, so this time next year, we might well see the real wage gains of 2023, 2024 and 2025 go away.

Another month of more output, and businesses using high prices to take profits over paying workers

As Summer winds down, it seems like the overall US economy is still holding up. For example, the Institute for Supply Management’s report from last week indicated that things kept rolling along on the services side in August.

Economic activity in the services sector continued to expand in August, say the nation’s purchasing and supply executives in the latest ISM® Services PMI® Report. The Services PMI® registered 55.4 percent, the 26th consecutive month in expansion territory.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In August, the Services PMI® registered 55.4 percent, an increase of 1.3 percentage points compared to July’s figure of 54.1 percent. The Business Activity Index remained in expansion territory in August, increasing 2.6 percentage points to 61.7 percent from July’s reading of 59.1 percent. The New Orders Index registered 60.9 percent, 3.7 percentage points above July’s figure of 57.2 percent. The Employment Index contracted for a second straight month with a reading of 47.8 percent, a 0.4-percentage point increase from the 47.4 percent recorded in July.

But the biggest number in the ISM index came from an area that you do NOT want to see it in, if you want the Fed to avoid raising interest rates in 10 days.

“The Prices Index registered above 70 percent for the fifth time in six months; the reading of 72.6 percent in August is 2.3 percentage points above July’s figure of 70.3 percent. The index has exceeded 60 percent for 21 straight months, with its 12-month average increasing by 0.4 percentage point to 68.5 percent, the highest since April 2023."

Sure sounds like things are going in the wrong direction on the inflation front, if we have the highest 12-month number in 3 1/2 years. And the rising costs were reiterated in this list later in the report.

And given that gas prices are now at a 3 month high, I can’t see the prices of those commodities or other ones that rely on transportation to be going down anytime soon.

But what’s with the disconnect of services employment declining while business activity grows stronger? Another report from Thursday seems to fill in those gaps.

Nonfarm business sector labor productivity increased 1.4 percent in the second quarter of 2026, the U.S. Bureau of Labor Statistics reported today, as output increased 1.7 percent and hours worked increased 0.3 percent. (All quarterly percent changes in this release are seasonally adjusted annualized rates.) From the same quarter a year ago, nonfarm business sector labor productivity increased 2.2 percent in the second quarter of 2026.

Unit labor costs in the nonfarm business sector increased 1.2 percent in the second quarter of 2026, reflecting a 2.6-percent increase in hourly compensation and a 1.4-percent increase in productivity. Unit labor costs increased 1.4 percent over the last four quarters.

BLS calculates unit labor costs as the ratio of hourly compensation to labor productivity. Increases in hourly compensation tend to increase unit labor costs and increases in productivity tend to reduce them. Real hourly compensation, which takes into account consumer prices, decreased 3.3 percent in the second quarter of 2026 and decreased 0.1 percent over the last four quarters. The labor share, which is the percentage of output that accrues to workers in the form of compensation, was 52.8 percent in the second quarter of 2026, the lowest level in the series, which begins in the first quarter of 1947.

Happy Labor Day, everybody! Workers are getting less back than they have in at least 80 years!

That makes for 5 straight quarters of year-over-year unit labor costs of 2% or less, well below the year-over-year rate of inflation in those quarters. And much less than the increases that workers were getting per unit 4 years ago, which at least offset some of the higher inflation of the time.

It also means that companies can either absorb some of the cost increases that they are dealing with, or (more likely) grab larger profits from the higher prices that are being charged while not trickling down any of those higher revenues to the workers that helped make it possible. Notice how the amount of hours worked has barely moved while productivity and output keeps going up in recent years.

Seems like something to keep filed away as we get a 3-day weekend to celebrate American laborers. And let's pay attention to how profits jump after the corporate tax rate has been kept low and given more writeoffs for 2025 and 2026 in Tax Scam 2.0. Just saying.

August jobs report may lead to rate hikes, but also isn't as great as you might think

It was another jobs Friday, which came a week after an initial benchmark indicated that job growth through March had been overstated by 79,000 (and 178,000 in the private sector).

File that away as you read about the initially reported numbers for August.

The U.S. economy in August added 162,000 jobs, far more than expected. The unemployment rate remained unchanged at 4.1%.

Economists surveyed by Dow Jones had expected overall hiring of just 53,000 roles and a steady unemployment rate.

Meanwhile, employment for June was revised up by 11,000 roles to a total addition of 31,000. July, which had previously been recorded as a negative 23,000, was revised up sharply by 44,000 to a total net job additions of 21,000….

“August’s blowout jobs report provided evidence of a stable labor market heading into the fall, supporting resilient consumer spending but also raising market expectations for a near-term Fed rate hike amid unacceptably high inflation,” Wells Fargo’s Jennifer Timmerman said.

This far exceeded the ADP report that estimated August's growth at 38,000 jobs earlier in the week, and UW's Madison's Menzie Chinn showed how this report indicated a significant acceleration from what we had in recent months.

But that line about how the jobs report increases the likelihood of the Fed raising interest rates in 2 weeks? That's the main reason I’m not immediately calling BS on it, because Donald Trump and the tech oligarchs strung out on debt do not want higher rates. Just look at what Trump rambled about on the same day the jobs report came out.

Trump posted on Truth Social, in what appeared to be a directive to the Federal Reserve, to "LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT."

Trump, who has long voiced a desire for lower interest rates, asserted that an embargo could be "BETTER THAN TARIFFS" and said "the Fed Board, with its great new leader, must get smart.".

An economy that is currently speeding up from slow growth and already has a Bubbly stock market isn’t one that needs to cuts rates and put inflation and that Bubble into overdrive.

Construction (+22,000) and Manufacturing (+16,000) in particular had strong Augusts. That continues strong and increasing job growth for construction and perhaps shows that manufacturing may finally be hiring after several years of losses through early 2026. Although I will add that recent preliminary benchmarks showed larger losses in the manufacturing sector through March, so I'll hold off on calling it a recovery for now.

There are a couple of items that indicate the job growth of August isn’t what a gain of 162,000 would crack up to be. The first is that the growth is heavily concentrated in only a few areas.

Change in jobs, US, August
Accomodation and Food Services +67,800
Local govt education +41,900
Health Care + Social Assistance +28,400
ALL OTHER SECTORS +23,900

In addition, many of those added jobs in Accomodation and Food Services as well as local govt education (aka - jobs in public schools) are heavily influenced by seasonal adjustments.

Change in jobs, US, August
Accomodation and Food Services (seasonally adj.) +67,800
Accomodation and Food Services (non-seasonal adj.) -22,300
Local govt education +41,900 (seasonally adj.)
Local govt education +327,300 (non-seasonal adj.)

Accomodation and Food Services frequently has layoffs as Summer ends, but by mid-August (when the survey was done for the August jobs report), fewer had happened than what we normally see. If there are more end-of-Summer layoffs coming in the Food Services and Accomodation industry past August 15 and early September, that may mean a loss looms for September.

On the flip side, many school teachers and staff start work with the school year, and in increasing parts of the country, it seems like school is underway by mid-August. So we may have merely ended up in a timing when an earlier school start meant more jobs than normal in mid-August, but it’ll also turn into a seasonally-adjusted loss when you get to September for the same reason.

One thing continued in this jobs report – low wage growth. Average hourly wages went up by a mediocre 0.27% for the month and 3.08% year-over-year, which continues a downward trend in this number even as productivity and prices keep increasing.

With gas prices going back over $4 a gallon in August (a month when gas prices usually fall), it’s almost certain that real wages will show another drop when the inflation report comes out next Friday, and it’ll likely be a larger decline than the - 0.2% year-over-year drop from July 2025 to July 2026.

So I don't draw much from this jobs report other than it being likely that some seasonal adjustments that helped boost the numbers for August should also limit any gains for September. I also would add that construction employment seems to be benefitting from an AI Bubble that is likely to pop sooner than later, and the lack of wage growth in a time of higher prices doesn't portend a big increase in real consumer spending by people with real jobs.