US Payrolls Rise by 162,000 in August as Unemployment Holds at 4.1%
US nonfarm payrolls rose by 162,000 in August, keeping the unemployment rate at 4.1%. The robust labor market data has shifted market expectations toward a 60% chance of a Federal Reserve rate hike ahead of the September FOMC meeting.
According to the latest economic review by David Kohl, Chief Economist at Julius Baer, the US labor market remains fundamentally robust, with nonfarm payrolls increasing by 162,000 in August after seasonal adjustments. The job growth was broad-based across various sectors, while previous figures were revised upward and the unemployment rate held steady at 4.1%.
This stronger-than-expected employment report has heightened uncertainty ahead of the Federal Reserve's policy meeting in September, shifting intense focus onto the upcoming inflation data.
Seasonal Adjustments Drive the Surprise
The surge in US payrolls in August came as a major surprise, with the economy adding 162,000 jobs after seasonal adjustments. This positive surprise is almost entirely explained by an unusually low seasonal adjustment factor this year compared to August 2025.
According to initial estimates, the seasonal factor had boosted job growth in August 2025 by 178,000, whereas the Bureau of Labor Statistics (BLS) assumed that the seasonal factor added only 8,000 jobs this year. This statistical variance resulted in a significantly higher seasonally adjusted job growth figure.
Beyond these statistical nuances, the underlying trend in the August employment data was solid. The previously reported job losses in July were revised upward to a moderate gain of 21,000, bringing the net two-month revision to an increase of 55,000 jobs.
Broad-Based Growth and Low Unemployment
The share of industries adding jobs rose to 55.6%, with cyclical sectors such as construction and manufacturing leading the hiring. Meanwhile, the unemployment rate remained stable at 4.1%. Alternative measures of labor market slack also continue to point to a low unemployment rate.
Implications for the Federal Reserve
The robust labor market report has intensified market speculation ahead of the Federal Open Market Committee (FOMC) meeting scheduled for September 16. With only 12 days remaining, implied probabilities from Fed funds futures pricing have shifted to a 40% chance of no change and a 60% chance of a 25-basis-point rate hike. Prior to the report, and following dovish remarks by Fed Governor Christopher Waller on September 3, the market was split 50-50.
David Kohl noted:
"Since the Fed is far more concerned about inflation than the labor market, we will closely monitor the August inflation report on September 11, which will be published before the FOMC meeting that determines US monetary policy. We expect the core inflation trend, excluding energy, to decline, allowing the Fed to keep interest rates unchanged once again. However, any upside surprise in next week's inflation data will significantly increase the chances of a rate hike and require a revision of our forecast of unchanged US interest rates."
