Jobs Growth Accelerates as Labor Market Remains Resilient Despite Rate Hikes
U.S. employers added stronger-than-expected jobs in recent weeks, with private employment averaging 20,000 positions per week and the unemployment rate holding steady at 4.1%. The resilient labor market is supporting consumer spending even as the Fed raises interest rates to combat inflation.
Employment Momentum Picks Up
U.S. private employers added an average of 20,000 jobs per week for the four weeks ending September 5, up from 16,750 in the previous report, marking the third consecutive report showing stronger job gains. This data comes as job gains have kept pace with the workforce, and the unemployment rate has changed little.
The unemployment rate is contained at 4.1%, while 7.3 million job openings continue to exceed the 7.0 million unemployed workers, suggesting that labor demand remains healthy. The Fed's median unemployment projection for end-2026 sits at 4.1%, lower than June's 4.3% median.
Consumer Spending Supported by Wage Gains
Continued employment and wage gains should help support household income and consumer spending, key pillars of the broader economy. This resilience is critical as the Fed tightens monetary policy, since resilient consumer spending and continued earnings growth can help offset higher interest rates, particularly if inflation gradually moves back toward the Fed's 2% target.
Labor Market Balancing Act
The Fed notes that economic activity is expanding at a solid pace, domestic spending has been resilient despite geopolitical uncertainties, productivity growth is strong, capital investment is robust, and job gains have kept pace with the workforce. However, inflation remains sticky, with median PCE inflation for 2026 at 3.7% (up from June's 3.6%), while median real GDP growth for 2026 edged to 2.3% from 2.2%.
Policy Implications
The combination of sticky prices, solid activity, and low unemployment is exactly when FOMC participants prefer a firmer path to a premature pause. Investors now anticipate three additional rate hikes by mid-2027, including one more hike this year, as the Fed balances its dual mandate of supporting employment while fighting inflation driven by higher energy prices.