The U.S. economy added jobs at a brisk pace in August, reversing a summer slowdown in hiring, while the unemployment rate held steady. Nonfarm payrolls rose a seasonally adjusted 162,000 for the month while the unemployment rate, as expected, held steady at 4.1%, the Bureau of Labor Statistics reported Friday.
The labour market delivered a more robust performance in Aug-26, with nonfarm payrolls surging by +162K (Jul-26: +21K), marking the largest monthly gain in five months and sharply outperforming market expectations of a +56K rise.
Job growth last month was primarily driven by rebounds in food services (+59K) and local government education (+42K), which offset previous-month losses. Manufacturing payrolls maintained an upward trajectory (+16K), backed by solid gains in machinery (+6K) and fabricated metal products (+6K), while healthcare continued its steady expansion (+13K), led by home health services (+11K) and hospitals (+8K). Conversely, the information sector contracted by -23K, weighed down by losses across computing infrastructure (-8K), publishing (-7K), and broadcasting (-5K). Net revisions were also positive, with June and July payrolls revised up by a combined +55K.
Meanwhile, the unemployment rate was steady at 4.1%, matching consensus expectations. Despite a +115K increase in the unemployed headcount to 7.03m, total employment rebounded sharply by +569K to 162.75m. This was further bolstered by a +683K expansion in the labor force to 169.78m, effectively lifting the labor force participation rate to 61.6% from its five-year trough of 61.4% in Jul-26.
The stronger-than-expected job growth report strengthens the case for the Fed to remain hawkish amid still-elevated inflation. Markets are now assigning nearly a 58% probability of a +25bps rate hike at the upcoming FOMC meeting next week, although the decision remains highly dependent on the Aug-26 inflation readings released this week. Hence, a Sep-26 rate hike is now slightly more likely, said MBSB in its report, particularly if the US inflation continues to show persistent price pressures.
