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Sept 4 (Reuters) – U.S. job growth accelerated sharply in August while the unemployment rate held steady at 4.1%, suggesting an improvement in the labor market after recent struggles, keeping an interest rate increase from the Federal Reserve this month on the table
The larger-than-expected increase in nonfarm payrolls last month reported by the Labor Department in its closely watched employment report on Friday reflected a rebound in leisure and hospitality employment after two straight monthly declines, as well as a reversal of the drag from local government education.
The unemployment rate was unchanged despite the labor force increasing by 683,000, adding another layer of strength to the report. Financial markets boosted rate hike bets at the U.S. central bank’s September meeting.
The odds had been dialed back after Fed Governor Christopher Waller said at a Reuters NEXT Newsmaker event on Thursday that he was inclined to argue in favor of keeping rates steady if upcoming data confirmed inflation pressures were cooling.
“The American labor market is in good condition heading into the end of the year,” said Joe Brusuelas, chief economist at RSM. “The data does lend support to the hawks at the Fed who are growing impatient with inflation.”
Nonfarm payrolls surged by 162,000 jobs last month, the largest gain in five months, after an upwardly revised rise of 21,000 in July, the Labor Department’s Bureau of Labor Statistics said. Economists polled by Reuters had forecast payrolls would increase by 56,000 after a previously reported drop of 23,000 in July. June payrolls were revised up by 11,000 to 20,000.
Payroll estimates for August ranged from as low as a loss of 25,000 jobs to as high as a gain of 121,000. Labor market momentum had decelerated after surging in the spring, partly blamed on the oil price shock and supply chain strains from the U.S.-led war with Iran.
Job gains averaged 71,000 per month in the three months through August compared to a loss of 9,000 over the same period in 2025.
Leisure and hospitality employment surged 62,000 last month, with payrolls at restaurants and bars increasing by 59,000 jobs. Local government education added 42,000 jobs, erasing a decrease in the prior month. Overall government payrolls rebounded by 35,000, and together with the leisure and hospitality sector accounted for more than 60% of the gain in employment.
Some economists said this suggested difficulties adjusting the data for seasonal fluctuations boosted August payrolls after restraining job growth in July.
