US Unemployment Held at 4.1% — Fed Rate Expectations Unchanged

• In August, the US economy added 162,000 jobs, while the unemployment rate held at 4.1%.
• The market still prices the probability of a Fed rate hike in September at around 58%.
• The regulator’s next meeting will take place on September 15–16, 2026.

The US Bureau of Labor Statistics (BLS) published the August labor market report. Nonfarm payrolls increased by 162,000, while the unemployment rate was unchanged at 4.1%. The labor force participation rate rose to 61.6%. 

Average hourly earnings rose by 0.3% month over month and 3.1% year over year. In addition, the BLS revised June and July data upward — by a combined 55,000 jobs.

Rate Expectations Are Largely Unchanged

After the initial reaction to the report, the probability of a 25-basis-point hike settled around 58% and did not change materially over the weekend, according to CME FedWatch. As a result, the market retains a slight tilt toward a hike, although that outcome cannot yet be considered a done deal.

The current target range is 3.5–3.75%. At the July meeting, the Fed kept it unchanged, with three FOMC members already voting for a hike at the time. The regulator’s next meeting will be held on September 15–16, with the decision to be announced on September 16. 

What Are the Fed and Market Participants Saying?

Fed Chair Kevin Warsh, in a speech at the Jackson Hole symposium, said the US labor market is consistent with full employment, while the inflation picture is more concerning. 

According to him, the regulator’s main focus should now be on price stability. At the same time, Warsh emphasized that he is not committing to a specific rate decision. 

After the data release, trader John Zidar noted on X that the strong jobs report strengthened the hawks’ case, but the final balance could be shifted by a new inflation report.

A similar link was previously flagged by Federal Reserve Governor Christopher Waller. He said he is leaning toward keeping rates unchanged if inflation continues to cool, but is ready to consider a hike if August data show a renewed rise in prices. 

As a result, the jobs report confirmed the labor market’s resilience, but it did not make a September rate hike a clear-cut scenario. Ahead of the meeting, inflation data will remain the key factor for the Fed.

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