Dive Brief:
- U.S. employers beat forecasts and added 162,000 jobs in August, the Labor Department said Friday, enabling the Federal Reserve to focus more in coming weeks on curbing inflation.
- Unemployment last month held steady at 4.1%, the Labor Department said while revising up total employment for June and July by a total of 55,000 jobs.
- “The August jobs numbers were much better than expected, focusing the Fed squarely on controlling inflation when they meet next” on Sept. 15-16, Fifth Third Commercial Bank Chief U.S. Economist Bill Adams said in a note.
Dive Insight:
Reports several weeks ago of meager payroll growth in June and July weakened the argument by Fed officials who favor raising the federal funds rate to fight inflation.
Three Fed policymakers dissented against a July decision to hold the benchmark rate at its current range between 3.5% and 3.75% and called for a quarter-point increase. Inflation has exceeded the central bank’s 2% target for more than five years.
With fresh employment data on Friday highlighting job market strength, reports due next week on producer and consumer price inflation will probably determine whether policymakers on Sept. 16 raise borrowing costs or once again forgo action, economists said.
“The next Fed decision will be finely balanced,” Adams said. “Next week’s release of the CPI [consumer price index] and PPI [producer price index] reports have the power to decide whether the Fed hikes or holds,” Adams said.
The report of robust hiring last month prompted traders in interest rate futures to increase the odds that policymakers will push up the main rate at their mid-month meeting to 58.4% from 49.4% on Thursday, according to CME Group’s FedWatch tool.
Fed Chair Kevin Warsh recently sent a reassuring signal about the labor market.
“I believe the labor markets are consistent with full employment,” he said in an Aug. 28 speech, noting that 4.1% unemployment is low by historical standards and has changed little in recent years.
“Unemployment claims, on a four-week average — an empirically robust real-time indicator — are near their lowest level in decades,” Warsh said.
The Fed, however, is not meeting its congressional mandate to ensure price stability, he said, noting that the personal consumption expenditures price index rose 0.2% in July and 3.7% from a year earlier.
“The Fed’s predominant focus right now should be on prices,” Warsh said.
Manufacturers last month added 16,000 jobs for a total of 58,000 since a recent low in December 2025, the Labor Department said.
In contrast, employment in information services fell by 23,000 in August following losses averaging 8,000 per month during the prior 12 months, the Labor Department said.
