The U.S. added 187,000 jobs in August, and the unemployment rate took a leap to 3.8%, according to the latest Employment Situation Summary from the U.S. Bureau of Labor Statistics.
With the unemployment rate jumping from 0.3% to 3.8%, the number of unemployed persons also grew from 514,000 to 6.4 million. August’s data is also higher than the same time last year, when the unemployment rate was 3.7%, and the number of unemployed persons was 6 million.
In addition, the analysis reported that employment in healthcare, leisure and hospitality, social assistance and construction continued to trend up; however, it trended down in transportation and warehousing.
Key findings:
- Healthcare added 71,000 jobs, following a gain of similar magnitude in the month prior. Over the month, job growth continued in ambulatory healthcare services (+40,000), nursing and residential care facilities (+17,000), and hospitals (+15,000).
- Employment in social assistance increased by 26,000, in line with the prior 12-month average gain (+22,000). Over the month, job growth continued in individual and family services (+21,000).
- Leisure and hospitality added 40,000 jobs compared with an average of 61,000 jobs per month over the prior 12 months. This metric remains below its pre-pandemic February 2020 level by 290,000, or 1.7%.
- Construction employment continued to trend up (+22,000), in line with the average monthly gain over the prior 12 months (+17,000). Employment continued to trend up over the month in specialty trade contractors (+11,000) and in heavy and civil engineering construction (+7,000).
- Employment in professional and business services grew slightly by 19,000, led by gains in professional, scientific and technical services (+41,000). Professional, scientific and technical services employment continued to trend up over the month (+21,000), while employment in temporary help services continued to trend down (-19,000).
- Transportation and warehousing lost 34,000 jobs. Employment in truck transportation fell sharply (-37,000), largely reflecting a business closure. Couriers and messengers lost 9,000 jobs, while air transportation added 3,000 jobs. Employment in transportation and warehousing had shown little net change over the prior 12 months.
- Average hourly earnings for all employees on private nonfarm payrolls rose by 0.2%, to $33.82. Over the past 12 months, average hourly earnings have increased by 4.3%. Average hourly earnings of private-sector production and nonsupervisory employees rose by 0.2%, to $29.
- The labor force participation rate rose 0.2% to 62.8%, and the employment-population ratio was unchanged at 60.4%. These measures remain below their pre-pandemic February 2020 levels (63.3% and 61.1%, respectively).
Major takeaways:
MBA SVP and Chief Economist Mike Fratantoni commented:
“Payroll employment increased in August, but with the markdowns in the rate of job growth for June and July noted in this report, the cumulative effect is a noticeable slowdown in the job market. Job gains are now averaging only 150,000 over the past three months. As in prior months, job growth is increasingly concentrated in just a few sectors like hospitality and healthcare, indicating that the pace of growth could slow much faster if these sectors were to cool down.
“The jump in the unemployment rate to 3.8% was caused by an increase in the labor force participation rate. More people are actively looking for work, but new or re-entrants to the labor market in August were not having much luck, pushing up the numbers of those unemployed for less than five weeks. This makes sense, given the report of businesses pulling back job openings over the past few months. Unfortunately, some started looking for work just as business demand for workers has begun to decline somewhat. Keep in mind that there are still many more job openings than unemployed individuals.
“Wage growth slowed a bit in August to 4.3% on an annual basis, which is still likely too high to be consistent with the Fed’s 2% inflation target.
“This report should be enough for the Fed to keep the federal funds target rate on hold at its next meeting. We expect that they will hold here until next spring, and their next move should be cut. The combination of a still strong job market, and rates that should trend down over time, is positive for the housing market.”
Realtor.com® Chief Economist Danielle Hale commented:
“Despite an uptick from downwardly revised June and July data, the August jobs report showed an ongoing step down in the pace of hiring over the longer term. Put another way, these metrics are at or near the lowest level in roughly two and a half years, but still above or at the upper end of the range of pre-pandemic norms, signaling a job market that is cooling but still generally favorable for workers.
“Today’s data is one of several new pieces of information out since the July Fed meeting, when the Committee raised the Fed Funds rate 25 basis points, and will inform updates to their June economic projections, which will be released in just a few weeks. Based on data before the jobs report, the market was not anticipating a hike in September, and I don’t expect that to change. Another hike before year-end isn’t off the table, but isn’t my base case.
“In recent months, the economy has charted a much-needed lukewarm path. Economic growth has been good but not great, the job market is hot, but cooling, and inflation isn’t back to target yet, but has posted some monthly readings that are definitely on the right track. Households still have significant savings and are in a pretty good financial position, which bodes well for consumer spending. For housing specifically, mortgage rates, affordability and availability continue to remain challenges. These competing forces are surfacing two types of buyers prominent in the housing market as we noted in the realtor.com® Hottest Zip Codes of 2023 report. Households with flexibility are continuing to use it to see out affordability, buoying Midwestern areas with low cost of living and strong local economies. Other households, presumably more tightly tethered to in-person work, are moving forward with home purchases in high-quality suburbs where prices may be at a premium, but the location and extra elbow room mean that plenty of potential buyers are willing to pay.”
For the full report, click here.
