Blowout jobs report scrambles Fed rate calculus

The US economy added far more jobs than expected in August, a result that reset market expectations for the Federal Reserve's September 16 meeting and reignited debate over how far artificial intelligence is reshaping who gets hired. Nonfarm payrolls rose by 162,000, well above economists’ expectations for a 55,000 increase. The unemployment rate held steady at 4.1%, in line with forecasts, while wage growth came in as expected, with average hourly earnings rising 0.3% month-over-month and 3.1% year-over-year. Payrolls grew well above every estimate in Bloomberg's consensus poll, according to Bill Adams, chief US economist at Fifth Third Commercial Bank. "Payrolls are growing considerably faster than needed to keep up with entrants to the workforce," Adams said. Still, he noted the labor force has contracted by 52,000 over the past twelve months as older workers retire and immigration slows. Beneath the strong headline number, Adams pointed to a split emerging in the labor market. Unemployment among this year's college graduates hit its highest level since 2014, a pocket of weakness he attributed in part to AI. "AI helps explain the disconnect," he said. "The technology is holding down hiring for new grads, making it harder to land a first job." At the same time, he said AI is boosting employment for workers in technical roles it makes more productive, with computer and mathematical occupations reaching a record share of the labor force in August. Adams also flagged improvement in broader measures of slack. The U-6 unemployment and underemployment rate fell to 7.7% from 7.9%, and unemployment among Black workers dropped to 6% from 6.3%, fully reversing a 2025 spike. He called that group's jobless rate a bellwether for the wider labor market.