US added 162,000 jobs in August, smashing expectations: jobs report

US employers added 162,000 jobs in August, handily beating economists' expectations, the Labor Department said on Friday.

The unemployment rate held steady at 4.1%. Economists surveyed by Bloomberg had been expecting a more modest gain of 55,000 jobs and a flat unemployment rate.

The food services sector added 59,000 jobs, while public education gained 42,000 positions. The healthcare sector, which has been responsible for much of this year's job gains, continued to grow, although at a slower pace, adding 13,000 jobs.

In a sign of ongoing challenges in white-collar employment, the information sector lost 23,000 positions.

"Wow. A huge August jobs report," Heather Long, chief economist at Navy Federal Credit Union, wrote in a post on X.

The latest jobs report also revised July's numbers into positive territory, from an initial surprise loss. June's figures also rose slightly.

"One month doesn't make a trend," Orphe Divounguy, chief economist at Quantitative Research Group, said in a statement. "But for now, the labor market looks steady — not strong, not collapsing."

Wages are up 3.1% from a year ago — a normally healthy number, but one that's likely below the current rate of inflation due to higher oil prices. Average hourly earnings improved 0.3% from a month ago.

Friday's report is a new data point for the Federal Reserve ahead of its Sept. 16-17 meeting. The central bank has been weighing whether to hike rates to combat persistently hot inflation, but doing so risks further slowing a relatively sluggish job market.

Many economists and market watchers view August inflation data, which will be released Sept. 11, as more important to the Fed's decision-making than the latest jobs figures.

"Markets may edge up their expectations for a September hike following today's release, but next week's CPI report is still likely to be the key swing factor for policy," Seema Shah, chief global strategist at Principal Asset Management, said in a statement Friday.

Indeed, the odds of a 25-basis-point rate hike in September rose modestly Friday morning, to around 60%, from close to 50-50 on Thursday, according to CME FedWatch.

Fed officials appear split on whether a rate hike in September is warranted. Chairman Kevin Warsh signaled in a speech last week that the Fed needs to do more to combat inflation, while Fed governor Christopher Waller said on Thursday that he would lean toward holding rates steady if new data shows that inflation is improving.

Claire Boston is a Senior Reporter for Yahoo Finance covering housing, mortgages, and home insurance.