The US economy added 162,000 jobs in August, more than double expectations

(CNN) — The US labor market in August roused from its early summer slumber by adding 162,000 jobs, more than double what economists had expected, while the unemployment rate remained at 4.1%, new data from the Bureau of Labor Statistics showed Friday.

August’s job gains – which are the strongest since March – mark a sharp rebound from July’s tally, which was revised up to a 21,000-job gain from a 23,000-job loss. June was also revised upwards, adding 31,000 positions. That’s up from the original estimate of 20,0000.

The number of jobs added in August was more than double economists’ expectations. They had forecast a net gain of 65,000 jobs last month and that the unemployment rate would tick up to 4.2%.

Friday’s data helps ease concerns that the job market was slowing rapidly, said Daniel Zhao, chief economist at Glassdoor.

“This jobs report did blow expectations out of the water,” Zhao said in an interview with CNN. “We are definitely getting a bit of whiplash here, where it feels like the reports are alternating between good and bad; but, overall, we’ll take the win.”

Which industries added jobs

The latest read on the labor market shows that it remains stable despite growing headwinds that include an aging population, the rapid adoption of AI, higher oil prices, policy uncertainty and the war with Iran.

However, hiring activity also has been in a low-momentum and unbalanced state, with the lion’s share of job gains coming from a concentrated set of industries (notably healthcare), meaning it’s a labor market that been working for some but not for all.

Wage growth slowed again in August, landing at an annual rate of 3.1%, a fresh five-year low. And it’s also the fourth month in a row that Americans’ pay gains were outpaced by overall inflation.

However, the employment gains in August were some of the broadest seen since President Donald Trump took office.

The diffusion index (a nerdy metric that’s meant to show the breadth of employment changes across 250 industries) rose to 55.6, the highest since December 2024. If the index is above 50, that means more industries added jobs than lost them.

Industries such as healthcare and social assistance (+28,400) continued to add jobs while local government education (+41,900 jobs) reversed a large loss from July (-57,500).

One of the month’s biggest job generators was the leisure and hospitality sector, which added 62,000 jobs, after having posted job losses of 21,000 and 54,000 in July and June, respectively. Hiring activity here is closely watched since discretionary spending factors in heavily to these businesses, and consumer spending powers two-thirds of the US economy.

Last month, the bulk of the sector’s gains were at restaurants and bars (+59,200).

Construction (+22,000) and manufacturing (+16,000) both added jobs for the second month in a row, a likely reflection of the massive buildout efforts of AI-related infrastructure.

At the same time, the information and financial activities sectors – which are highly exposed to the adoption of AI – both contracted, shedding 23,000 jobs and 11,000 jobs, respectively.

‘Whiplash’ that puts all eyes on CPI

August also marked the first increase in the labor force participation rate in eight months. The percentage of working-age people who have a job or are looking for one rose 0.2 percentage points to 61.6%, reversing the declines in June and July.

And the number of people working part-time for economic reasons fell to its lowest level in nearly two years, BLS data shows.

However, the “low-churn” labor market has meant many people are on the outside looking in. The percentage of unemployed workers who have been job-hunting for 15 weeks or more rose to 43% in August, a five-year high.

While August’s stronger-than-expected jobs report quells fears that the labor market was at risk of collapsing, it also reflects a pendulum swing after lackluster gains in July and June.

“August’s pick-up in payrolls looks like payback after two very weak months and the reversal of a seasonal adjustment distortion to education jobs, rather than a sustainable shift to a faster growth rate,” economists at Pantheon Macroeconomics wrote Friday in a note to investors.

Monthly economic data usually is quite volatile; however, the jobs reports this year have delivered a whipsaw effect (the biggest being a 370,000-job swing from February to March).

The choppiness can be attributed to a variety of factors, including extreme weather; labor strikes; methodological calibrations; shifts in hiring patterns; and, not to mention, the effects of stark demographic changes, technological adoption and macroeconomic matters.

“While the August report and prior months’ revisions are encouraging signs, we are not yet seeing stable momentum,” ZipRecruiter economist Nicole Bachaud noted Friday. “Fluctuations in prices and confusion over policy initiatives will continue to impact job growth and turnover.”

The two-year Treasury yield jumped after the data release, reflecting increased expectations that the Federal Reserve has room to raise interest rates at its policy meeting later this month. The 10-year yield moved slightly higher.

“As one of the final pieces of data ahead of the Fed’s mid-September meeting, it’s not surprising that the market reaction suggests a lean toward rate hike expectations,” Atsi Sheth, Moody’s Ratings chief credit officer, wrote in a note Friday. “But there is still another important data release before the meeting: August [Consumer Price Index], which will be in even sharper focus.”

The CPI is scheduled for release next Friday. It’s expected to show that prices rose 0.4%, keeping the annual rate at 3.4%, according to the Federal Reserve Bank of Cleveland’s inflation “nowcast.” Excluding the volatile food and energy categories, prices are likely to rise 0.2%, slowing the annual core rate of inflation to 2.3%, according to the Cleveland Fed.

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