US Jobs Surge By 162,000 In August, Unemployment Stays At 4.1% As India Eyes Fed Rate Hike

The US labour market delivered a major surprise in August, with employers adding 162,000 nonfarm jobs, nearly three times economists’ expectations, strengthening the case for the Federal Reserve to keep interest rates high or even consider a hike. The development is also being closely watched in India as it could affect the rupee, equities and foreign investment flows.

The unemployment rate remained at 4.1%, while the labour force participation rate rose to 61.6%. July’s employment figure was also revised sharply upward from an initially reported loss of 23,000 jobs to a gain of 21,000.

Average hourly earnings increased 0.3% in August. The combination of stronger hiring, steady unemployment and wage growth gives the Fed another reason to remain cautious about cutting rates.

The report comes ahead of the Fed’s September 15-16 meeting, with markets now shifting towards a possible rate hike. The probability of a September hike rose to about 61% from 52% before the jobs report, according to Reuters.

The stronger data has also prompted some economists and financial institutions to push back expectations for rate cuts. Citigroup, for instance, moved its forecast for the Fed’s next rate cut from October 2026 to June 2027 following the jobs report.

For India, the Fed’s decision will be important because higher US interest rates and Treasury yields can strengthen the dollar and put pressure on the rupee. They can also make US assets more attractive relative to emerging-market investments, potentially affecting foreign portfolio flows into Indian equities.

The US labour market, however, continues to show mixed signals. Private employers added only 38,000 jobs in August, according to ADP data, while job openings stood at 7.3 million in July.

Food services and drinking places added 59,000 jobs in August, while local government education also recorded strong gains. The information sector lost jobs.

Investors will now turn to upcoming US inflation data before the Fed meeting. For India, the key question is whether the strong jobs report marks a temporary rebound or signals that the US central bank may keep rates higher for longer.