US job market rebounds with 162,000 new jobs, far surpassing expectations

The US job market rebounded in August as employers added a surprising 162,000 jobs. The unemployment rate stayed at a low 4.1 per cent.
The jobs report, issued by the Labour Department on Friday, could be good news for President Donald Trump two months before midterm elections in which the health of the economy is weighing on voters’ minds.
Hiring far exceeded the 65,000 forecasters had expected, according to a poll by FactSet. Labour Department revisions also looked good, adding 55,000 to June and July payrolls. Employers created 21,000 jobs in July; the Labour Department had originally reported that they would cut 23,000.
Restaurants and bars added 59,000 jobs last month, construction companies 22,000 and manufacturers 16,000.
And the US labour force – the number of people working or looking for work – jumped by 683,000 last month after falling in June and July.
Yet many households are struggling with the high cost of living, and wage gains are not helping much. Average hourly wages rose 3.1 per cent last month from a year earlier, the weakest year-over-year increase since May 2021.
Friday’s report may increase the likelihood that the Federal Reserve will raise its key short-term interest rate when it next meets on September 15-16. Solid hiring sends a signal that current borrowing costs are not necessarily high enough to restrain the economy and cool inflation.

Fed chair Kevin Warsh said last week that inflation, at 3.7 per cent according to the Fed’s preferred measure, remained too far above the central bank’s 2 per cent target, and added that without further progress, they would have “work to do”.
With hiring seemingly healthy, the Fed’s focus will shift to a critical inflation report that is being released next week. On Thursday, Fed governor Christopher Waller said he was leaning towards keeping the Fed’s rate unchanged, but would support a hike if inflation comes in high.
Contributing to inflation is the struggle that US employers have had dealing with a shortage of workers – the result of Trump’s immigration crackdown and the retirement of baby boomers. Some are responding by using technology for tasks that human beings used to do.
Employers have been reluctant to let go of the staff they have, so most Americans enjoy unusual job security and unemployment is low.
“It’s a very strange labour market,’’ David Kelly, chief global strategist at J.P. Morgan Asset Management, wrote in a commentary on Monday.
The No 1 puzzler: hiring is weak, but lay-offs are rare.
Employers have not been eager to take on new workers. The Labour Department reported Tuesday that gross hiring – before subtracting people who lost or left their jobs – fell 5 per cent to fewer than 5.1 million new jobs.

The United States does not need as many jobs as it did until recently to keep the national unemployment rate from rising. Trump’s immigration crackdown and baby boomer retirements mean fewer people are available for work. More than 1.3 million people have dropped out of the US labour force over the past year.
As a result, the “break-even’’ rate of monthly hiring, 155,000 in 2023-2024, has dropped, perhaps to nearly zero, according to a Federal Reserve study.
Instead of looking to hire from a diminished pool of available workers, “businesses are increasingly focused on boosting efficiency through technology and AI and increasingly seek to do more with their existing workforce”, EY-Parthenon economists Gregory Daco and Lydia Boussour wrote in a commentary this week.
Even if they are not hiring aggressively, companies are reluctant to let go of the staff they have. They retain memories of the unexpected labour shortages that followed the end of COVID-19 lockdowns.
So unemployment remains low. For the past year, the number of people applying each week for unemployment benefits – a proxy for lay-offs – has stayed in a historically low range of around 200,000 to 230,000.
The result is what economists call a “no-hire, no-fire” labour market in which those who have work enjoy job security, but times are tough for young workers trying to land entry-level jobs or unemployed people seeking to get back to work.