The US Job Market Is Running Hot Again. That Changes The Rate Debate
US employers added 162K jobs in August while unemployment held at 4.1% in August. The report gave the Federal Reserve less cover to stay cautious at its Sept. 15 to Sept. 16 meeting, because hiring rebounded after early-summer weakness.
Payroll gains were far above the 56K forecast and the strongest in five months. July was revised to a 21K gain from a previously reported 23K loss.
The labor force grew by 683K, yet the unemployment rate stayed unchanged, adding weight to the view that demand for workers remains firm.
"The American labor market is in good condition heading into the end of the year."
Joe Brusuelas, RSM.
Hiring sees a rebound
Restaurants and bars added 59K jobs, while local government education added 42K after a drop in the prior month for education payrolls.
Manufacturing added 16K jobs, construction added 22K, and healthcare rose 13K, below its 32K monthly average over the past year.
The information sector lost 23K jobs, while financial activities lost 11K, with economists pointing to AI adoption in some roles.
The share of industries adding jobs rose to 55.6%, the highest level since December 2024. Average hourly earnings rose 3.1% from a year earlier, below July's 3.2% gain and close to recent inflation pressure.
Consumer prices rose 3.4% in July, which means pay growth is doing less to support household spending power.
The Fed Now Waits on Inflation
Traders priced roughly 60% odds of a quarter-point rate hike after the report, up from lower expectations earlier in the week after Fed comments.
Fed officials had already signaled that inflation data would decide the September meeting more than the jobs report. The next consumer inflation report is due next Friday, and producer-price data is also due before policymakers meet.
President Donald Trump called the August report a strong number and urged the Fed to cut rates instead of raising them. The labor market still has weak spots, including longer unemployment spells and a job market economists describe as slow to hire and slow to fire.
Only 34% of Americans noted that August was a good time to land a quality job for workers. That matters for younger workers and job switchers, who can face a tougher search even when layoffs stay low.
The August report doesn't settle the Fed debate, but it removes the cleanest argument against another hike.