US job growth beats expectations, but wages lag inflation

The US job market bounced back strongly in August, delivering a surprise boost after hiring cooled during the summer.

Employers added 162,000 jobs, more than three times the 53,000 economists had expected. The unemployment rate stayed at 4.1%, showing that the labor market remains relatively steady.

The gains came from several parts of the economy. Restaurants and bars added 59,000 workers, while government education created 42,000 jobs. Manufacturers added another 16,000 positions. Healthcare, usually one of the biggest sources of new jobs, added 13,000.

Earlier employment figures also looked better after revisions. July’s reported job loss turned into a 21,000-job gain, while June’s increase rose to 31,000.

However, wage growth fell to 3.1% from 3.7% a year earlier, failing to keep pace with inflation.

The strong jobs report could make the Federal Reserve’s next decision harder. Officials must now balance a healthy labor market against inflation that remains above their 2% target.

Next week’s inflation data will be key as the Fed considers whether to raise rates at its September 16 meeting.

Rate-hike expectations increased yesterday, with market odds rising from 49% to 59%. The two-year Treasury yield, closely tied to the Fed’s policy rate, also rose.

Meanwhile, high gasoline prices and weak hiring rates could still challenge consumers and job seekers.