U.S. payroll growth rebounded in August, with nonfarm payrolls rising by 162,000 and surpassing consensus expectations, according to data released on Friday. The unemployment rate moved up by 5 basis points to 4.14%, and the labor force participation rate increased by 0.2 percentage points to 61.6%.
The composition of the payroll gains showed a return to form for sectors that had previously underperformed. Leisure and hospitality added 62,000 positions, while local government education contributed 42,000 jobs as both categories normalized after recent declines. Healthcare and construction also continued to add workers, supporting the broader employment recovery.
Revisions to prior months were notable. After upward adjustments to June and July, the three-month average for payroll growth now stands at 71,000, up from 20,000 before the latest report was released. Household employment rose by 569,000 in August, and the overall labor force expanded by 683,000. Measured against the January benchmark revisions, the participation rate remains 0.5 percentage points lower.
Goldman Sachs provided an estimate of the underlying pace of job creation derived from both the payroll and household surveys, putting that figure at 53,000 following the report, compared with an estimate of 5,000 prior to the data release.
Policy implications and Evercore's view
Evercore interpreted the payroll upside as strengthening confidence that the labor market can withstand a potential Federal Reserve rate increase, but the firm judged that the August employment report is not a decisive factor for the Fed's upcoming September decision. "Next week’s inflation data will still drive the hold vs hike decision, though payroll strength could tip the decision if that data breaks right on the cusp of the hold / hike divide," Evercore said.
The firm added that if employment momentum persists, it would be more likely to shape policy deliberations on a horizon similar to December rather than alter the immediate September calculus.
Friday’s employment release was part of a sequence of labor-related data across the week: it was the third of four consecutive days focusing on the labor market, following Tuesday’s JOLTS figures and Wednesday’s ADP private employment tally for August.
Market context
Investors and policymakers will be watching next week’s inflation readings closely, given Evercore’s view that inflation prints remain the pivotal input for the Fed’s hold versus hike decision. The labor data reinforces the narrative of a labor market that retains underlying strength, but does not on its own alter the near-term policy outlook according to Evercore.
Overall, August’s report adds to evidence that employment conditions continue to improve in pockets while leaving the September policy decision dependent on upcoming inflation metrics.