The U.S. economy added jobs at a fast pace in August, reversing the summer employment slump and the unemployment rate stabilized.
Nonfarm payrolls rose by a seasonally adjusted 162,000 people in the month, and the unemployment rate held steady at 4.1%, as expected, the Bureau of Labor Statistics said Friday. Economists surveyed by Dow Jones had expected a pay increase of 53,000.
August’s total was the largest monthly increase since March.
“The labor market is genuinely buoyant, creating thousands of new jobs and helping to keep economic growth in positive territory,” said Chris Rupkey, chief economist at Forwardbonds.
The report is consistent with what Fed officials are calling labor market stabilization, and the central bank’s focus is likely to shift to next week’s report on consumer and producer prices as the final deciding factor for an upcoming interest rate decision in two weeks.
While stock market futures mostly fell after the announcement, U.S. Treasury yields soared, especially short-term interest rates, where Fed policy has the greatest impact.
Following the consensus beat on the report, the market inched toward the possibility of a Fed rate hike. Traders are still pricing in about a 60% chance of a 40 percentage point hike at the central bank’s Sept. 15-16 policy meeting, according to CME Group’s FedWatch tool.
“The upside in the jobs report is likely to heighten concerns about rate hikes, but that outcome will depend on next week’s inflation data,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management. “A weaker-than-expected outcome would make the Fed feel comfortable discounting potential inflation signals from the labor market.”
President Donald Trump called the August report “a great jobs report” and said the Fed should cut rates, not raise them.
“With a great new leader in place, the Federal Reserve Board must be smart. We must be patriots for change,” Trump said in a social media post. “High interest rates have put the United States at a very unfair disadvantage, and we cannot allow that to happen!”
The president also threatened to cut off trade with countries with which the United States runs deficits unless the Fed cuts them. The United States has deficits with more than 90 countries.
“If we don’t cut interest rates, we will stop trading with deficit countries,” Trump wrote. “The United States Supreme Court, in its ridiculous and extremely costly tariff ruling, firmly affirmed that the ‘President’ has the absolute right to do so.”
Policymakers are generally monitoring the unemployment rate more closely for the health of the labor market, and it has remained consistent over the past few years, actually falling by 0.2 percentage points compared to a year ago. There was good news on this front as well, with the unemployment rate holding steady even as the labor force participation rate, a measure of people employed or seeking jobs, rose by 0.2 percentage points.
The household survey, which is used to calculate the unemployment rate, showed a total of 569,000 jobs added and a sharp increase of 683,000 people in the labor force.
The replacement unemployment rate, which counts disengaged workers or those taking part-time jobs for financial reasons, fell to 7.7%, a drop of 0.2 points to the lowest level since June 2025.
In addition to the solid increase in August, upward revisions were also seen in previous months. July saw an increase in jobs of 21,000, a turnaround from a decrease of 23,000, but June was revised upward to an increase of 31,000, or an increase of 11,000.
Unlike the previous month, employment gains were fairly broad-based.
Restaurants and bars added the most jobs with 59,000 new jobs, followed by government education, which added 42,000 jobs, and manufacturing, which added 16,000 jobs. The healthcare sector, the main driver of job growth, added just 13,000 jobs per month, compared to an average of 32,000 per month over the previous 12 months.
There is some evidence that artificial intelligence is taking a toll on payrolls, with information industries reporting losses of 23,000 jobs, for a 12-month average of 8,000 losses.
Average hourly wages rose 0.3%, in line with consensus, and the annual increase of 3.1% was 0.1 percentage points higher than expected.
Market expectations regarding the future direction of interest rates have fluctuated in recent days.
Following comments from Federal Reserve Chairman Kevin Warsh last week, traders are pricing in strong expectations that the Federal Open Market Committee will raise the benchmark interest rate by 0.5% at its Sept. 15-16 meeting.
But statements this week from Gov. Christopher Waller and other officials made the outlook uncertain. The FOMC has not adjusted the federal funds rate since the third rate cut in late 2025.
Policymakers have expressed far greater concern about inflation, which has been above the Fed’s 2% target for the past five and a half years.
The jobs report will be a preparation for BLS statistics on producer prices and consumer prices, scheduled for Thursday and Friday, respectively.
Waller said he would support keeping the rate on hold as long as reports showed inflation was moderating on a monthly basis. New York Fed President John Williams told CNBC earlier this week that he was “wait-and-see” about the statistics, while President Michael Barr said he would be content to keep rates unchanged as long as inflation remains “moderate.”
But Barr and Waller said they are prepared to raise if the data doesn’t match up.
