Total nonfarm payroll employment increased by 187,000 in August, led by growth in the health care, leisure and hospitality, social assistance, and construction sectors, according to the latest jobs report from the U.S. Bureau of Labor Statistics (BLS). The August report also included downward revisions for jobs gains in both June—down 80,000 to 105,000—and July—down 30,000 to 157,000.
“The Fed has been raising short-term interest rates since last March to slow inflation and the labor market. For over a year, there were few signs that higher rates were cooling growth,” says Zonda chief economist Ali Wolf. “The past couple jobs reports and inflation reads, however, are finally showing signs of cooling. This is an important step to allow the Fed to consider when they might be done raising rates.”
The unemployment rate rose by 30 basis points to 3.8% in August, and the number of unemployed persons increased by 514,000 to 6.4 million. Both measurements are little changed from August 2022, when the unemployment rate was 3.7% and the number of unemployed persons was 6 million.
“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 reentrants to the labor market in August were not having much luck, pushing up the number of those unemployed for less than five weeks,” says Mike Fratantoni, senior vice president and chief economist of the Mortgage Bankers Association (MBA). “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.”
According to the BLS, the labor force participation rate rose by 20 basis points to 62.8%, after being flat since March. The employment-population ratio was unchanged over the month at 60.4%.
The number of persons unemployed less than five weeks and the number of long-term unemployed edged up during August to 2.2 million and 1.3 million, respectively. The number of persons not in the labor force who currently want a job was 5.4 million in August, little changed from the previous month.
Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force was little changed at 1.5 million in August. These individuals wanted and were available for work and had look for a job sometime in the prior 12 months, but had not looked for work in the four weeks preceding the BLS Household survey.
Wage growth increased 20 basis points on a month-over-month basis, and, over the past 12 months, average hourly earnings have increased by 4.3%.
“This report should be enough for the Fed to keep the Federal Funds target rate on hold at its next meeting,” Fratantoni says. “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.”