U.S. employers added a robust 162,000 jobs in August, the Labor Department said Friday, far surpassing economists’ consensus expectations. The unemployment rate held steady at 4.1%.
Forecasters surveyed by The Wall Street Journal predicted a gain of 53,000 jobs, while those surveyed by FactSet expected 65,000.
The report assuaged some concerns about the state of the labor market after hiring had softened considerably earlier in the summer. The results for the prior two months were revised higher by a combined 55,000 jobs, as well, with July’s change flipping from an initial loss of 23,000 to a gain of 21,000.
Where things stand in the labor market: Employers have added an average of more than 80,000 jobs a month over the first eight months of the year, Paul Wiseman of the Associated Press points out. That’s up significantly from a monthly average below 10,000 for last year but is still well shy of the 166,000 monthly gains seen in 2023 and 2024. The average increase over the past three months now stands at just over 70,000.
Some economists suggested that the August increase in hiring was just a rebound from the soft prior months rather than a sign of a major acceleration in the labor market.
The sectors seeing the biggest monthly changes in August included:
- Leisure and hospitality, up 62,000, including a jump of more than 59,000 at “food services and drinking places”;
- Government, up 35,000, driven by an increase of 42,000 in “local government education” as many schools started a new academic year. Other government sectors saw employment fall by 7,000;
- Healthcare and social assistance, up 28,400;
- Construction, up 22,000;
- Manufacturing, up 16,000, a third straight monthly increase, lifting employment in the sector to the highest since last May. Factory jobs are up 58,000 from December, the Labor Department said.
- Financial, down 11,000;
- Information, down 23,000.
Wages still trail inflation: Over the past year, average hourly earnings have increased by 3.1%, short of the 3.4% annual rise in inflation as of July. That helps explain why Americans continue to be gloomy about the state of the economy — and it could threaten consumer spending, which has held up surprisingly well overall even as higher gas prices have cut into household budgets. “We expect to see consumer spending growth to be capped over the coming months,” EY-Parthenon Chief Economist Gregory Daco told The Wall Street Journal.
Heather Long, chief economist at Navy Federal Credit Union, said in a post on X that wage growth is now the lowest in five years. “Americans are being squeezed financially right now,” she wrote. “Credit card debt is at a record high, savings is the lowest in years, and personal loan use is up. Consumption is almost certainly going to slow.”
Another data point for the Fed: In a note to clients, J.P. Morgan economist Michael Feroli called the August report “pretty good” and said it could provide more room for policymakers on the Federal Open Market Committee to raise rates.
“The spring-summer cooling in job growth turned around, labor supply took a leg up, and wage growth remained supportive of consumer spending without fanning inflation fears,” he wrote. “Before today, Fed speakers pointed to next week’s CPI [inflation] report as the decisive data point for the next FOMC meeting. That is still undoubtedly true, though if it’s a toss-up, today’s report will support the hawks.”
Trump again calls for lower interest rates: In posts on his social media site, President Trump welcomed the job gains and again called on the Federal Reserve to cut rates — otherwise, he threatened, he would stop trading with countries with which the United States has a trade deficit. “The Fed Board, with its great new leader, must get smart - BE PATRIOTS for a change,” Trump wrote.
After stocks tumbled Friday on fears that the healthy jobs report raises the likelihood of a rate hike, Trump complained about investors’ reaction, and he challenged the economic model that holds there is an inverse relationship between employment and inflation.
“How crazy is this? We just got GREAT Numbers on Jobs, the Market should go UP, because our Credit and Economy are better but, as always, for the past 25 years, the Stock Market goes DOWN, because we’re living under False Reality that if things are good, you’ve got to ‘KILL IT’ because of a ‘fear’ of Inflation,” Trump wrote, adding, “GROWTH DOES NOT CAUSE INFLATION!”
Many economists take issue with Trump’s understanding of the global economy, arguing that trade deficits aren’t necessarily good or bad and that there is indeed some trade-off between growth and inflation.
What’s next: The Labor Department’s Consumer Price Index report on inflation is scheduled to be released next Friday. Federal Reserve officials will be watching that report closely as they decide whether to raise interest rates.