U.S. nonfarm payrolls surged by 162,000 jobs in August, according to data released by the Labor Department’s Bureau of Labor Statistics, blowing past analyst expectations and keeping an interest rate increase from the Federal Reserve on the table for September. The unemployment rate held steady at 4.1% even as the labor force expanded by 683,000 workers.
August Job Growth Details and Sector Performance
The stronger-than-expected employment figures marked the largest monthly job gain in five months. According to the Bureau of Labor Statistics, the July nonfarm payrolls figure was revised upward to a gain of 21,000 jobs from a previously reported drop of 23,000, while June figures were revised up by 11,000 to 20,000.
Economists polled by Reuters had anticipated a much smaller payroll increase of 56,000 for August. The actual surge of 162,000 was largely driven by a rebound in leisure and hospitality, which added 62,000 jobs—including a 59,000 increase at restaurants and bars following two straight monthly declines. Local government education added 42,000 jobs to erase previous losses, helping overall government payrolls rebound by 35,000. Together, government and leisure sectors accounted for more than 60% of total employment gains.
Other sectors showed mixed results. Manufacturing payrolls increased by 16,000, construction added 22,000 positions, professional and business services rose by 10,000, and healthcare employment grew by 13,000. However, the healthcare gain slowed compared to its 32,000 average monthly increase over the prior year, a shift that economists suggest may reflect the revocation of Temporary Protected Status for hundreds of thousands of Haitian immigrants impacting work permits. Meanwhile, the information sector shed 23,000 jobs, and financial activities lost 11,000 positions, primarily in finance and insurance, which economists attributed to the adoption of artificial intelligence for some work roles.
Federal Reserve Policy and Market Reactions
Financial markets quickly shifted expectations following the jobs report. CME’s FedWatch tool showed investors pricing in a roughly 62% chance of a quarter-percentage-point rate hike at the Fed’s September 15-16 meeting, up sharply from about 49% on Wednesday. The central bank’s benchmark overnight interest rate currently sits in a target range of 3.50% to 3.75%.
The robust hiring data countered remarks made earlier in the week by Fed Governor Christopher Waller at a Reuters NEXT Newsmaker event. Waller had stated he was inclined to argue for keeping rates steady if upcoming economic data confirmed that inflation pressures were cooling. Joe Brusuelas, chief economist at RSM, noted that the August data lends support to policy hawks at the central bank who are growing impatient with inflation.
Despite the sharp rise in payrolls, wage growth slowed slightly. Wages increased 3.1% in the 12 months through August, down from a 3.2% increase in July, indicating that the labor market is not currently acting as a source of inflation. The average workweek also lengthened to 34.4 hours in August—the longest since March 2024—up from 34.3 hours in July. The share of industries reporting job growth rose to 55.6%, reaching its highest level since December 2024.
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