The U.S. economy churned out 162,000 jobs in August, blowing past expectations even as employers grappled with myriad headwinds weighing on hiring.
The unemployment rate held steady at 4.1 percent, a low level consistent with a healthy labor market, according to Labor Department data released Friday.
Forecasters had expected gains of about 65,000 new jobs in August, in line with weak recent growth. Instead, hiring grew far more substantially, with restaurants and bars leading the way, the report said. Meanwhile, data for June and July were revised up by a combined 55,000 jobs, suggesting that the labor market has been stronger than previously thought.
All told, the fresh data suggests that the labor market is on solid footing, despite some obvious weak spots.
“This jobs report is pretty solid all the way around,” said Dan North, an economist with Allianz Trade North America, a trade credit insurance firm. Combined with other data, it “paints a picture that is stable but unexciting,” he said.
President Donald Trump rushed to trumpet the strong job numbers on his social media platform Truth Social, where he argued that they should encourage the Federal Reserve to lower interest rates.
“Great jobs number just announced, breaking all estimates (except mine!),” Trump wrote. He added, “Lower the interest rates because the U.S.A. is a much stronger credit than it was just a short time ago! A STRONG COUNTRY MEANS A LOWER INTEREST RATE — IT’S A BETTER CREDIT … Very simple!”
Despite the pressure from Trump, Friday’s report is likely to give the Fed ammunition to hike interest rates when policymakers next meet in mid-September. In a speech last week in Jackson Hole, Wyoming, Fed Chair Kevin Warsh expressed concerns about persistent inflation, adding that the central bank may have “work to do” if rates remain high.
Since then, a majority of investors have been anticipating a rate hike. On Friday, financial markets traded lower as the hardy jobs data increased that prospect.
Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, said in an analyst’s note Friday that the “upside surprise in payrolls will likely ramp up concerns about a rate hike.”
The Fed will probably look even more closely at next week’s inflation numbers, she said: “If those come in cooler than expected, the Fed will likely feel comfortable discounting potentially inflationary signals coming out of the labor market.”
But fresh data on inflation could highlight a dark spot in Friday’s jobs report: decelerating wage growth. Average hourly earnings grew to $37.75 an hour in August, an increase of just 3.1 percent over the past year. With inflation running slightly higher, next week’s data could show prices once again growing faster than wages, due largely to higher gas prices triggered by Trump’s war in Iran.
That would mark another blow to American consumers, who overwhelmingly disapprove of Trump’s handling of the war and are feeling gloomy about their pocketbooks heading into the Nov. 3 midterm elections.
Friday’s report showed that job growth in August was spread across a variety of industries, fueling optimism that the labor market could be turning a corner. Restaurants and bars added 59,000 jobs. Manufacturing employers added 16,000 jobs, driven by gains in subindustries that appear to be benefiting from tariffs.
The health care sector also continued to grow, albeit at a softer pace than in recent years when the sector buoyed the entire labor market. Job gains of 42,000 also occurred in local government education, offsetting unexpected job losses in the sector in July.
Construction also grew, fueled by the boom in data centers for artificial intelligence. But white-collar sectors, where concerns about job displacement from AI are strongest, fared less well. The information sector, which includes tech and media, lost 23,000 positions, and the finance sector lost 11,000 positions.
The share of Americans working or looking for work partially recovered in August, to 61.6 percent. That data should help assuage worries — driven by July figures showing the lowest labor force participation rate since 2021 — that workers in their prime are abandoning job searches.
However, economists remain concerned about a shrinking workforce as the baby boom generation retires and the Trump administration continues its crackdown on immigrants. Hundreds of thousands of Haitians lost their legal immigration status this summer and were forced out of the workforce.
Still, Americans continue to spend at a healthy pace, helping fuel the labor market growth, and layoffs remains at historically low levels. Initial filings for unemployment benefits ticked up slightly last week to 206,000, but are at levels consistent with a healthy labor market, according to data released Thursday by the Labor Department.
And in August, tens of thousands of workers who said they faced difficulties finding employment rejoined the workforce, new data showed.
“New jobs, broader industry participation, and workers feeling confident enough to voluntarily leave positions all point to underlying resilience,” said Nicole Bachaud, a labor economist at the jobs site ZipRecruiter, in an emailed note.
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