The U.S. labor market rebounded in August, with nonfarm payrolls increasing by 162,000 and upward revisions adding 55,000 jobs to June and July. The unemployment rate held steady at 4.1%, as both employment and the labor force participation rate rose over the month. August’s gain leaves just five outright monthly declines in payrolls over the past year and a half, with the most recent occurring in February. While the strength reported for the labor market is positive, today’s data increases the probability of a Federal Reserve rate hike in the near future. Wage growth continued to cool, with average hourly earnings rising 3.1% year over year in August, down from 3.2% in July and marking the slowest pace of 2026. Average hourly earnings reached $37.75. Meanwhile, a recent sharp increase in energy and gasoline prices, driven by conflicts in the Middle East, has pushed inflation higher even as wage growth has slowed.