Will upbeat jobs report lead to a Fed rate hike later this month?

U.S. employers added a blazing 162,000 jobs in August, tripling the 53,000 expected by most economists and reversing, at least for now, the sluggish growth trend that’s marked the first seven months of the year.

Friday’s Employment Situation summary from the Labor Department finds the national unemployment rate remained unchanged at 4.1% in August as job gains hit their highest level since March. Last month’s job growth far exceeded both the 31,000 average monthly gains over the past year and the 61,000 per month in 2026 before August’s surge.

Among August’s job leaders were restaurants and bars, adding 59,000 new positions last month, local government education jobs, which grew by 42,000 and the manufacturing sector, adding 16,000 to its employee rosters.

Tech jobs, which have been declining by an average 8,000 positions per month so far this year, continued that trend with the sector seeing some 23,000 job losses. Among the worst hit of the information businesses were computing infrastructure providers, data processing, web hosting and related services, which shed 8,000 positions, according to Labor Dept. tracking.

Friday’s report also included revisions to previous data releases, including an adjustment to July’s job numbers which were originally reported as a net loss of 23,000 positions. Revisions moved that tally into positive territory with a gain of 21,000 jobs.

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

Will the positive job numbers lead to higher interest rates?

Even as inflation has moved up since the start of the Iran war earlier this year, and has stayed above the Federal Reserve’s target annual rate of 2% for more than five years, the U.S. central bank hasn’t made an adjustment to its benchmark interest rate since a series of cuts in its last three meetings of 2025.

In recent weeks, speculation has swirled around how the monetary body would react as both sides of its dual mandate – maintaining price stability while nurturing maximum employment – were buffeted by disparate economic winds.

Generally speaking, Federal Reserve rate cuts help spur economic activity by reducing the cost of debt, which can promote business activities like investment and hiring. Rate hikes, which increase the cost of consumer and commercial debt, quell spending and help slow down inflationary price increases.

While sluggish job growth through the summer had helped suppress most economists’ expectations for a Fed rate change at its policy meeting later this month, Friday’s report has already reversed that dynamic. The latest predictions are now better than even that the monetary body will make a 0.25% upward adjustment to its intra-bank overnight lending rate, which has been parked in the 3.5% to 3.75% range since the start of the year.

“An upside surprise in payrolls will likely ramp up concerns about a rate hike, but that outcome is in the hands of next week’s inflation numbers,” Ellen Zentner, chief economic strategist for Morgan Stanley Wealth Management, said in a Friday email to CBS News. “If those come in cooler than expected, the Fed will likely feel comfortable discounting potentially inflationary signals coming out of the labor market.”

August’s Consumer Price Index inflation report is due out just days ahead of the Fed’s next policy-setting meeting on Sept. 15-16. The most recent CPI reading of 3.4% for July was down 0.1% from June but well ahead of the 2.9% that preceded the start of the Iran war. July’s slower rate was helped out by a drop in U.S. energy prices, as peace talks aiming to quell the Middle East conflict helped calm global petroleum markets. But following those negotiations stalling out, and renewed hostilities between the U.S. and Iran, fuel and energy prices have once again escalated.

Consumer gas prices, which jumped some 30% shortly after the U.S. and Israel launched attacks against Iran in late February, hit a new record in August, averaging over $4 per gallon throughout the month for the first time ever. According to tracking by AAA, the national average for a price of regular throughout the month of August was $4.07 per gallon. On Friday, the average gas price across the country was $4.15 per gallon. Utah drivers are seeing even higher prices at the pump right now, with an average price of $4.42 per gallon on Friday.