What a Blowout August Jobs Report Means for a September Rate Hike
The August jobs report was released Friday morning. Here's what the numbers show.
"Labor markets are quite stable," said Federal Reserve Chair Kevin Warsh last Friday in his keynote address at the Jackson Hole Economic Symposium. He pointed to the unemployment rate, which, at 4.1%, "remains low by historical standards."
And while July payrolls came in much lower than expected, a blowout August jobs report underscores a resilient labor market.
According to the Bureau of Labor Statistics, the U.S. added 162,000 new jobs in August, easily exceeding economists' estimates of 58,000.
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The unemployment rate, which is derived from a separate survey, remained at 4.1%, as expected.
Additionally, job growth for June (+11,000 to +31,000) and July (+44,000 to +21,000) was upwardly revised, resulting in a combined 55,000 more jobs than previously reported.
Food services and drinking places saw the largest increase in jobs, adding 59,000 positions in August. Local government education, meanwhile, added 42,000 jobs last month, offsetting a decrease in July.
The information industry saw the largest job losses in August, including computing infrastructure providers, data processing, web hosting, and related services (-8,000), publishing (-7,000), and broadcasting and content providers (-5,000).
The good-news-is-bad-news jobs report sent expectations for a September rate hike higher. According to CME Group FedWatch, futures traders are now pricing in a 60% chance the central bank will increase the federal funds rate by a quarter-percentage point when it meets later this month, up from 49% one day ago.
ADP jobs report came in lower than expected
The August jobs report stood in sharp contrast to the ADP National Employment Report, released Wednesday morning. The ADP data showed private payrolls rose by 38,000 in August, less than the 46,000 added in July and below the 47,000 economists expected.
The industries seeing the largest increases in jobs were education, health care, leisure and hospitality, and construction, while manufacturing saw the biggest decline in positions.
With the August jobs report on the books, we looked at what economists, strategists and other experts on Wall Street have to say about the results and what they could mean for the Fed and investors going forward. You'll find these reactions, edited at times for brevity, below.
What Wall Street has to say about the August jobs report
"An upside surprise in payrolls will likely ramp up concerns about a rate hike, but that outcome is in the hands of next week's inflation numbers. If those come in cooler than expected, the Fed will likely feel comfortable discounting potentially inflationary signals coming out of the labor market." - Ellen Zentner, Chief Economic Strategist for Morgan Stanley Wealth Management
"The August payroll release quelled any lingering labor fears putting next week's inflation data firmly in the driver's seat for the FOMC's rate decision later this month. This print was unambiguously strong with surging private payrolls, upward prior month revisions, and solid breadth with the diffusion index reaching its best level since 2024. Today's print is modestly negative for equity markets, as the valuation pressure from higher yields is being partially offset by the resilience of the labor market." - Jeff Schulze, Head Investment Strategist at Franklin Templeton Institute
"Much stronger than expected payrolls certainly won't ease calls for a rate hike sooner than later and that's likely to weigh on equities with higher costs of capital and longer duration in the near term. The report confirms that inflationary pressures — thus far largely driven by extensive investment in AI infrastructure that we estimate could account for 2.5% of GDP in 2026 — are likely to keep prices well above the Fed's stated target. While strengthening employment could lift consumer stocks that have been broadly underperforming this year, it could pressure expensive and rate-sensitive segments of large caps. Likewise, small-cap stocks, which typically contend with a much higher cost of capital than large-cap peers, might hit some turbulence — at least until Q3 earnings, which are expected to be quite strong, begin to roll in." -Michael Casper, Senior Market Strategist, Director of Equity at HB Wealth
"If you squint, you might see the outlines of the AI displacement. Sectors with high AI adoption (information, financial) were weaker. Sectors that are building/equipping/powering data centers (construction, manufacturing, utilities) were stronger. That should support incomes in the lower leg of the K." - Brad Conger, Chief Investment Officer at Hirtle & Co.
"The addition of 162 thousand job will certainly go in the 'hike' column as the Fed weighs whether to increase the policy rate in the face of persistent inflation this month, but Chairman Warsh has already directed the market to look through this number and focus on the inflation data coming next week in form of the CPI print. The strong jobs print comes on the back of a decidedly weak print last month, reminding us that volatility in this statistic is here to stay as the economy teeters around full employment." - Bradford Smith, Portfolio Manager at Janus Henderson Investors
"The big issue for markets is whether or not the Federal Reserve will raise interest rates later this month and although inflation has been an issue, the job market has been more variable, and for some members of the FOMC, it has been something they had kept an eye on and has been one reason they weren’t raising rates more quickly to fight inflation. Although it's not a given that the Fed will raise rates on September 16, especially given the optics of a national election less than two months after the meeting, there are plenty of reasons to raise interest rates (to fight inflation) and less reasons to keep rates unchanged (to support the labor market)." - Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management
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