August's 162,000 jobs make a September rate hike more likely than not
Nonfarm payrolls increased 162,000 in August 2026, the BLS said Friday, September 4, and June and July were revised up by a combined 55,000.
Fed-funds futures on Friday morning implied a 58% probability of a quarter-point increase at the Federal Reserve's September 15-16 meeting, about 9 percentage points higher than Thursday. The Bureau of Labor Statistics had just reported that employers added 162,000 jobs in August, against a 31,000 average monthly increase over the prior year. Food services and local-government education together accounted for 101,000 of the gain.
Consumer prices are still above the Fed's 2% target. The consumer price index rose 0.1% in July after seasonal adjustment and 3.4% from a year earlier, BLS reported on August 12. The index excluding food and energy rose 0.2% on the month and 2.5% over the year. August figures are due Friday, September 11.
July's contraction was revised into a small gain
June payroll growth was revised from 20,000 to 31,000. July was revised from a 23,000-job loss to a 21,000 gain. Combined, the two months are 55,000 higher than first reported.
The 162,000 August gain is well above the Dow Jones estimate of 53,000. The revised June and July figures remain modest. Diane Swonk, chief economist at KPMG, called the report "a summer heat wave" at 9:15 a.m. Eastern time.
Two industries supplied most of the gain
Hiring spread beyond restaurants and schools. Manufacturing, construction, and health care added jobs, and more private industries were hiring than in July.
The private-industry diffusion index, which tracks how many industries are adding jobs rather than cutting them, rose to 55.6 from 52.8. Manufacturing diffusion jumped to 61.1 from 52.1. A reading above 50 means more industries expanded than contracted.
Information cut 23,000 jobs after losses that had averaged 8,000 a month over the prior year. The declines included computing infrastructure, data processing, web hosting and related services (−8,000), publishing (−7,000), and broadcasting and content providers (−5,000).
A larger labor force kept the jobless rate at 4.1%
The establishment survey counts payroll jobs. The household survey counts people. They did not tell the same August story.
Payrolls rose 162,000. In the household survey, employment increased 569,000 and the labor force increased 683,000. The extra workers did not come off the unemployment line. The number of people not in the labor force fell 551,000 to 105.6 million, while the civilian population grew by 133,000. Unemployment rose 115,000 to 7.0 million. The unemployment rate was unchanged at 4.1%.
The labor-force participation rate edged up 0.2 percentage point to 61.6%. It is still 0.5 percentage point below January and 0.7 percentage point below 62.3% in August 2025. The employment-population ratio rose to 59.1% from 58.9%, against 59.6% a year earlier. The number of people not in the labor force who currently want a job changed little at 5.7 million.
Average hourly earnings for all private employees rose 10 cents, or 0.3%, to $37.75 in August and were up 3.1% over the year. That annual rate compares with a 3.4% rise in consumer prices through July; August prices have not been published. The private workweek edged up 0.1 hour to 34.4 hours.
Participation remains lower than a year ago, so August's influx is a move back toward last summer's level, not a break above it. Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management, said an upside surprise in payrolls would likely raise concerns about a rate increase, "but that outcome is in the hands of next week's inflation numbers." Federal Reserve Governor Christopher Waller said Thursday that if the next two weeks of data keep showing disinflation, he would be inclined to leave the federal funds rate unchanged.
Yields jumped, then faded
At 8:38 a.m. Eastern time, shortly after the release, the 10-year yield had risen to 4.8% and the 2-year to 4.4%. The 5-year yield's session high of 4.582% matched its 52-week high.
That first move did not hold in cash Treasuries. Mid-morning marks taken between 10:30 and 10:50 a.m. Eastern time put the 10-year yield at 4.775% after a session high of 4.805%, the 5-year at 4.532%, and the 30-year little changed at 5.241%. The iShares 20+ Year Treasury Bond ETF TLT, which holds long-term U.S. government debt, was up 0.26%.
Equity indexes were modestly lower: the S&P 500 down 0.38%, the Dow Jones Industrial Average down 0.55%, the Nasdaq Composite down 0.29%.
The September 15-16 meeting now has a payroll gain well above the year's trend, most of it in food services and local schools, and a household survey that found 551,000 people moving back into the labor force. August consumer prices are due September 11.
Frequently asked
How big was the August jobs gain?
Employers added 162,000 jobs, far above the Dow Jones estimate of 53,000 and well above the 31,000 average monthly gain of the prior year.
Why didn't the unemployment rate fall?
The labor force grew by 683,000 as people returned from the sidelines, so the jobless rate stayed at 4.1% even as employment rose.
Does this settle the Fed's September decision?
No — Morgan Stanley's Ellen Zentner said the outcome rests on next week's inflation numbers, and Fed Governor Christopher Waller said continued disinflation would incline him to hold rates steady.
How did markets react?
Treasury yields jumped right after the release and then faded through mid-morning, while the S&P 500, Dow and Nasdaq all finished the morning modestly lower.