U.S. Employment (August 2026)

Payrolls surge by 162k in August, unemployment rate holds at 4.1% 

• Nonfarm payrolls rose by 162k in August, following only 21k in July. This morning's print beat consensus by a wide margin which called for 55k.  
• The prior two months were revised higher by a total of 55k – pushing the three-month average up to 71k (from 38k in July). 
• Private sector hiring added a heathy 127k, up from July's 71k. Nearly half of the gain was concentrated in leisure & hospitality (+62k), while health care & social assistance (+28.4k), construction (+22k) and manufacturing (+16k) also registered decent gains.  
• The diffusion index, which captures the share of industry's adding jobs, rose to 55.6 % - its highest level since December 2024. 
• Public sector hiring was higher by 35k, as a strong gain in local government (+50k), offset pullbacks at both the federal (-5k) and state (-10k) level.  
• In the household survey, the unemployment rate held steady at 4.1%, as growth in both civilian employment (+569k) and labor force (+683k) surged on the month. The labor force participation rate rose by two-tenths of a percentage point to 61.6%, after reaching a 5+ year low of 61.4% in July.  
• Average hourly earnings rose 0.3% month-on-month (m/m), pushing the year-ago measure down to 3.1% (from 3.2% in July).  

Key Implications

• This is the strongest pace of job expansion in five months, punctuated by also being three times greater than expected and the positive upward revisions to prior months. The three-and-six month moving averages are now 70k and 107k, respectively – slightly higher than the breakeven rate. And while we could argue that some of last month's strength in leisure & hospitality and local government were likely overstated, the breadth of hiring was solid, rising to a 20-month high!   
• On balance, we like the breadth and depth of this jobs report. Markets have taken note too. Treasury yields rose following the release, while Fed futures now assign a 60% probability of a September rate hike, up from 50% prior. However, it’s next week’s CPI report that is the clincher on moving the needle from the Fed's current standpoint position. A strong print would reinforce the case for tightening at the next meeting, while a report that meets expectations could provide sufficient reason for the FOMC to remain on hold. 

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