August jobs report may lead to rate hikes, but also isn't as great as you might think

It was another jobs Friday, which came a week after an initial benchmark indicated that job growth through March had been overstated by 79,000 (and 178,000 in the private sector).

File that away as you read about the initially reported numbers for August.

The U.S. economy in August added 162,000 jobs, far more than expected. The unemployment rate remained unchanged at 4.1%.

Economists surveyed by Dow Jones had expected overall hiring of just 53,000 roles and a steady unemployment rate.

Meanwhile, employment for June was revised up by 11,000 roles to a total addition of 31,000. July, which had previously been recorded as a negative 23,000, was revised up sharply by 44,000 to a total net job additions of 21,000….

“August’s blowout jobs report provided evidence of a stable labor market heading into the fall, supporting resilient consumer spending but also raising market expectations for a near-term Fed rate hike amid unacceptably high inflation,” Wells Fargo’s Jennifer Timmerman said.

This far exceeded the ADP report that estimated August's growth at 38,000 jobs earlier in the week, and UW's Madison's Menzie Chinn showed how this report indicated a significant acceleration from what we had in recent months.

But that line about how the jobs report increases the likelihood of the Fed raising interest rates in 2 weeks? That's the main reason I’m not immediately calling BS on it, because Donald Trump and the tech oligarchs strung out on debt do not want higher rates. Just look at what Trump rambled about on the same day the jobs report came out.

Trump posted on Truth Social, in what appeared to be a directive to the Federal Reserve, to "LOWER THE RATE OR I'LL STOP TRADING WITH COUNTRIES WITH WHICH WE HAVE A DEFICIT."

Trump, who has long voiced a desire for lower interest rates, asserted that an embargo could be "BETTER THAN TARIFFS" and said "the Fed Board, with its great new leader, must get smart.".

An economy that is currently speeding up from slow growth and already has a Bubbly stock market isn’t one that needs to cuts rates and put inflation and that Bubble into overdrive.

Construction (+22,000) and Manufacturing (+16,000) in particular had strong Augusts. That continues strong and increasing job growth for construction and perhaps shows that manufacturing may finally be hiring after several years of losses through early 2026. Although I will add that recent preliminary benchmarks showed larger losses in the manufacturing sector through March, so I'll hold off on calling it a recovery for now.

There are a couple of items that indicate the job growth of August isn’t what a gain of 162,000 would crack up to be. The first is that the growth is heavily concentrated in only a few areas.

Change in jobs, US, August
Accomodation and Food Services +67,800
Local govt education +41,900
Health Care + Social Assistance +28,400
ALL OTHER SECTORS +23,900

In addition, many of those added jobs in Accomodation and Food Services as well as local govt education (aka - jobs in public schools) are heavily influenced by seasonal adjustments.

Change in jobs, US, August
Accomodation and Food Services (seasonally adj.) +67,800
Accomodation and Food Services (non-seasonal adj.) -22,300
Local govt education +41,900 (seasonally adj.)
Local govt education +327,300 (non-seasonal adj.)

Accomodation and Food Services frequently has layoffs as Summer ends, but by mid-August (when the survey was done for the August jobs report), fewer had happened than what we normally see. If there are more end-of-Summer layoffs coming in the Food Services and Accomodation industry past August 15 and early September, that may mean a loss looms for September.

On the flip side, many school teachers and staff start work with the school year, and in increasing parts of the country, it seems like school is underway by mid-August. So we may have merely ended up in a timing when an earlier school start meant more jobs than normal in mid-August, but it’ll also turn into a seasonally-adjusted loss when you get to September for the same reason.

One thing continued in this jobs report – low wage growth. Average hourly wages went up by a mediocre 0.27% for the month and 3.08% year-over-year, which continues a downward trend in this number even as productivity and prices keep increasing.

With gas prices going back over $4 a gallon in August (a month when gas prices usually fall), it’s almost certain that real wages will show another drop when the inflation report comes out next Friday, and it’ll likely be a larger decline than the - 0.2% year-over-year drop from July 2025 to July 2026.

So I don't draw much from this jobs report other than it being likely that some seasonal adjustments that helped boost the numbers for August should also limit any gains for September. I also would add that construction employment seems to be benefitting from an AI Bubble that is likely to pop sooner than later, and the lack of wage growth in a time of higher prices doesn't portend a big increase in real consumer spending by people with real jobs.