Photo credit: Alex Kotliarskyi
The U.S. labor market is showing some unexpected strength at the end of the summer, adding some 162,000 jobs in August. That number is nearly three times what economists expected (55,000). Moreover, positive data revisions added another 55,000 jobs to the two prior months, while the unemployment rate remained low. Simply put, this is a good jobs report, and it changes the employment picture: from a sluggish labor market this summer to one that has suddenly outperformed expectations by quite a bit. The six-month moving average of job growth is at 106,000, which is the highest in over two years. It also shows the importance of not putting too much weight on any single data point since later data revisions often reveal new information.
Industry Breakdown
Leisure and hospitality was one of the big drivers of this month’s surprisingly good report, adding more than 62,000 jobs after underperforming earlier this summer despite the World Cup taking place. Healthcare and social assistance added 28,000 jobs, followed by 22,000 in construction and 16,000 in manufacturing.
One sector that continues to underperform is information and communication, which lost another 23,000 jobs. It remains unclear to what extent AI is driving this adverse trend. Professional business services, the other sector considered to have high AI exposure, added some 10,000 jobs in August.
Construction delivered an upside surprise. Even as interest rates have been heading higher — typically a headwind for the sector — employment growth has been picking up in recent months, with 22,000 jobs added in August. It is pretty clear what’s driving this: the sector is riding the data center boom, which is now large enough to show up in the GDP figures. Data center construction is also creating very tight regional labor markets in the parts of the country where this infrastructure investment is taking place.
Another surprise: healthcare, normally the engine of job growth, lost some momentum, adding just 13,000 jobs. Employment in nursing and residential care facilities even declined.
Local government education rebounded with 42,000 jobs, reversing the sharp decline in July and confirming suspicions that recent volatility is a seasonal distortion — the regular rise and fall of public-school payrolls during the summer.
Unemployment steady while wages run below inflation
The unemployment rate remained low at 4.1%, unchanged from the previous two months. As a result, worries about the labor market that emerged last fall have clearly subsided.
The prime-age labor force participation rate ticked up to 83.4%, but remains noticeably lower than earlier this spring. This is the only figure in the jobs report that gives any real cause for concern. There is, however, the possibility that the dip is just a weird data error, driven by seasonal adjustment factors or other statistical quirks. Or perhaps the Trump administration's tighter immigration policies are shrinking the pool of foreign-born workers, who tend to have higher participation rates.
Wage growth showed little change, with average hourly earnings for frontline workers (non-managers) growing at a rate of 3.3%. Given the recent acceleration in inflation due to the oil price shock, real wage growth is now negative. This is obviously bad news for workers. But given the strong job numbers, this will not really change the outlook for the Federal Reserve: Monetary policymakers will now, in all likelihood, raise interest rates in September, as inflation measures show rising price pressures and the labor market data has substantially surprised on the upside.
What the preliminary benchmark report is telling us about the labor market
The monthly payroll numbers we discuss on each jobs day come from a survey of roughly 121,000 businesses. Over time, the survey might drift away from the true state of the labor market. That is why, once a year, the Bureau of Labor Statistics (BLS) checks its homework against unemployment insurance tax records covering nearly every employer in the country.
This year’s preliminary benchmark report, released on August 28, was refreshingly boring. Total employment in the year through March 2026 was revised down by 79,000, or 0.1% — far smaller than the revisions in previous years: 860,000 in 2025 and 600,000 in 2024.
The story gets more interesting at the sectoral level. The pattern of revision tells a slightly different story from the monthly employment data: Information was revised up by 87,000 jobs, or 3% — the largest percentage gain of any sector. Construction was revised up by 62,000, financial activities by 85,000, and transportation and warehousing by a striking 135,100. The offsets were concentrated in goods handling and consumer-facing work: retail trade was revised down by 154,600, wholesale trade by 86,200, and manufacturing by 67,000. Keep in mind, though, that these revisions will not be incorporated into the monthly jobs data until February next year.
What does this mean for recruiters?
The August job numbers surprised on the upside, with various sectors outperforming expectations: hospitality, construction, and manufacturing, to name just a few. The combination of above-target inflation and surprisingly resilient employment growth means the Federal Reserve will very likely raise rates this fall.
While the tech sector continues to shed jobs, keep in mind that this data is subject to revisions, which could reshape the story later — sometimes substantially. The preliminary benchmark estimates released last week suggest that some sectors were performing better than the monthly reports indicated in the year through March 2026. In other words, the parts of the economy we’ve been telling you were struggling — white-collar tech hiring, construction under high interest rates — have been creating more jobs than the initial data suggested, while the weakness in retail was deeper than we thought.
For recruiters, this doesn’t exactly reshuffle the entire hiring landscape, but it does change the picture. If construction employment has been understated, the talent pool in that field is even tighter than the monthly jobs data suggested. The upward revision to transportation and warehousing is the one to watch heading into peak season: competition for warehouse labor is likely to be stiffer this fall. Retail is the mirror image, with a larger pool of available candidates than the headline numbers imply.