U.S. employers added 162,000 jobs in August, a surprisingly robust figure that well exceeded consensus estimates.

Economists polled by Dow Jones had predicted 53,000 nonfarm payroll additions, while FactSet’s survey had forecast 65,000 jobs added.

The unemployment rate held steady at 4.1% in August, the U.S. Bureau of Labor Statistics reported Friday. The BLS also upwardly revised June and July’s payroll tallies by a combined 55,000 jobs.

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Drilling down to the sector level, food and drink establishments added 59,000 positions in August, well exceeding the 12,000 monthly average over the prior 12 months. Local government education added 42,000 jobs, largely reversing losses from July. Other sectors posting gains included manufacturing (up 16,000), healthcare (up 13,000) and construction (up 22,000).

Employers still hiring despite high inflation

For Sam Williamson, senior economist at title insurer First American Financial Corp., the August labor surprise puts the focus squarely back on inflation as the Federal Reserve considers its policy stance at its mid-September meeting.

“For the Federal Reserve, the strong report should ease any lingering concerns about a softening labor market,” Williamson noted in emailed commentary. “That puts a thumb on the scale toward a rate hike at the Fed’s meeting in two weeks, though next week’s inflation report will likely be the deciding factor. A strong inflation reading for August could close the case for an increase.”

On the housing front, Williamson observed that job growth generally supports demand, “but mortgage rates will determine how much of that demand makes it across the finish line.”

Mike Fratantoni, chief economist of the Mortgage Bankers Association (MBA), noted that the unemployment rate stayed at 4.1% despite the labor force participation rate ticking up by two-tenths of a percentage point.

“The unemployment rate decreased for workers with less than a high school education, suggesting the jobs being created are lower-wage positions, and this change in the mix of jobs is likely a factor in the slowdown in overall wage growth, which dropped to 3.1% in August,” Fratantoni said in commentary shared with Scotsman Guide.

Like his First American counterpart, the MBA economist agrees that the resiliency of the labor market means inflation data set for release by the BLS next week “is likely to be the key driver” of whether the Fed decides to hike interest rates at its September meeting.

Odds of a rate hike increased Friday morning following the BLS jobs print, according to CME FedWatch, rising to around 60% from an even 50% the day prior.