Trump pressures the Federal Reserve to adjust interest rates after adding 162,000 jobs

U.S. August employment data exceeded expectations, Trump pressured the Federal Reserve to cut interest rates and threatened trade sanctions.

As U.S. employers added 162,000 jobs in August, U.S. President Donald Trump once again called for lower interest rates and threatened to stop trade with countries with trade deficits.

Job growth exceeded expectations

The U.S. Bureau of Labor Statistics (BLS) reported on Friday that non-farm payrolls increased by 162,000 in August, while the unemployment rate remained at 4.1%. Economists surveyed by Reuters expect the economy to add about 56,000 jobs. The August increase was also well above the monthly average of 31,000 jobs added over the past 12 months. The number of unemployed people changed little, remaining at 7 million, and the labor force participation rate rose slightly to 61.6%.

The revised data further enhance the strength of reporting. The Bureau of Labor Statistics raised its June increase to 31,000 from 20,000 and revised its July forecast to add 21,000 jobs from a 23,000 job loss. As a result, joint employment growth for the two months was 55,000 higher than originally reported.

Specific industry-specific data shows that the catering service industry added 59,000 new jobs in August, compared with an average monthly increase of only 12,000 in the past 12 months. Local government education departments added 42,000 jobs, and manufacturing employment rose 16,000. However, the information industry laid off 23,000 jobs, including losses to computing infrastructure providers, publishers and broadcasters. Healthcare employment increased by 13,000, but was below the monthly average of 32,000 over the past year.

According to the Bureau of Labor Statistics, hourly wages rose 0.3% from July and 3.1% from the same period last year. The average work week increased by 0.1 hour to 34.4 hours.

The latest data reverses some of the signs of weakness seen in previous jobs releases. Earlier reports pointed out that a preliminary estimate of 23,000 jobs fell in July, prompting traders to reduce expectations for further interest rate hikes and push the Bitcoin price past $65,000 at one point.

Trump pegs interest rate requirements to trade

After the August report was released, Trump posted through "Truth Social" that the US economy is strong and the Federal Reserve should be allowed to reduce borrowing costs. "Lower interest rates because the credit status of the United States of America is much stronger than it was not long ago!" Trump wrote. He also said the United States should have "the lowest interest rates of any country in the world, just like in the 'old days.' His demands conflict with the reaction of interest rate markets, with strong jobs data raising expectations that the Fed may raise interest rates at its September 15 - 16 meeting.

Trump then linked monetary policy to his trade agenda, threatening to take action against countries that sell more goods and services to the United States than they buy from it. "Lower interest rates or I will stop trading with countries where we have deficits," Trump wrote, according to Reuters. In another part of his post, Trump argued that high interest rates put the country at a "very unfair disadvantage." He also called on Fed officials to "change their lives and become patriots" and claimed that cheaper borrowing would benefit the United States more than tariffs.

The Federal Reserve independently sets interest rates through the Federal Open Market Committee. Its decisions are based on employment and price stability rather than direct instructions from the White House. Trump's trade threats did not specify the countries affected, timetables or legal mechanisms their governments might use. Reuters reported only that if the Federal Reserve does not cut interest rates, it will stop trading with countries with deficits in the United States.

Previously, a July tariff announcement covering 60 U.S. trading partners caused Bitcoin to fall below $65,000, when U.S. Treasury yields rose and leveraged long positions absorbed most of the associated cryptocurrency clearing.

Bitcoin drops below US$80,000

Bitcoin's first reaction to Friday's trading session was positive, with assets hitting an intraday high of about $82,262. After the jobs report, the sell-off accelerated, pulling BTC from about $81,600 to about $79,800 within minutes. This reversal erased the increase in Bitcoin's price of more than $2,000, bringing it back below the $80,000 mark. The move follows a sharp rebound in August, during which BTC rose about 25%, and U.S. spot Bitcoin exchange-traded funds (ETFs) received net inflows of $3.52 billion in 16 of 21 trading sessions.

CoinGlass data cited in the original report showed that approximately $251 million in leveraged crypto positions were liquidated in the four hours before and after the employment report was released. Among them, long positions accounted for approximately US$216 million, and short liquidations totaled US$35.14 million.

eToro U.S. investment analyst Bret Kenwell told Reuters that investors may interpret employment data through the lens of "good news is bad news", which could put pressure on stocks and recently recovering crypto assets such as Bitcoin. Kenwell said the Fed believes the labor market is close to full employment and that inflation is its main policy concern. According to this interpretation, strong hiring has reduced the need for cheap credit to support the economy.

A Federal Reserve policy analysis on September 3 found that interest rate expectations for Bitcoin already posed a risk to its August increase when the employment report was released. CME FedWatch earlier this week set the probability of a 25 basis point rate hike in September at 66%, while oil prices above $90 and persistent inflation put pressure on policymakers.

Higher U.S. interest rates could affect U.S. crypto investors by increasing returns on government debt and other interest-bearing assets. Kenwell attributes this connection to capital competition, allowing investors to achieve higher returns without taking on Bitcoin price risks.

Interest rate hike expectations rise after employment data

According to Reuters, after the employment data was released, federal funds futures pricing showed a 61% probability of a rate hike at the September meeting, up from 52%. Another Reuters market report showed that the probability after release was about 59%. The 54% probability given in the original report was replaced by stronger data, which appeared to have been captured at different points in time during the session. As traders adjust positions, interest rate probabilities can change throughout the day.

U.S. Treasury yields rose after the release, with policy-affected two-year yields rising five basis points to 4.38%. The 10-year yield rose one basis point to 4.776%, the U.S. dollar index rose 0.2%, and gold fell 1.2%.

Citigroup immediately postponed its forecast for the Federal Reserve's next interest rate cut from the end of 2026 to June 2027. The bank now expects to cut interest rates by 25 basis points three times in June, September and December 2027, after previously predicting interest rates in October and December 2026 and January 2027.

Federal Reserve Governor Christopher Waller had said the day before that the next inflation report would have considerable weight in his September decisions. His remarks helped push the probability of a rate hike on Polymarket down to 38%. The Bureau of Labor Statistics will release the August producer price index (PPI) on September 10 and the consumer price index (CPI) on September 11. The Federal Open Market Committee will begin a two-day meeting on September 15 and announce its interest rate decision on September 16.