The U.S. added a less-than-forecast 142,000 jobs in August, the Labor Department said Friday, in a pivotal report expected to pave the way for the Federal Reserve to cut interest rates later this month. Previous payrolls were also revised lower, but unemployment was little changed at 4.2% and average hourly earnings rose 3.8% from a year earlier, suggesting some upside for workers. Analysts said the report offered few fresh signals on exactly how much the Fed will reduce rates at its Sept. 17-18 meeting, but a quarter-point reduction is widely expected.
The economy added fewer jobs than anticipated in July, when the unemployment rate unexpectedly rose to 4.3%.
Data this week showed job openings dropping to their lowest level since 2021.
Settling in to a slower pace of expansion
The August Jobs report was weaker than expected with 142K nonfarm jobs added (cons. 165K), but an improvement from last month’s (initial) 114K jobs. Downward revisions took July’s figure to an even lower 89K jobs, whereas private sector employment improved to 118K. Notably, the unemployment rate ticked lower to 4.22% from 4.25%, a small relief after its recent uptrend.
💡 This report wasn’t necessarily the rebound we were looking for, but it does splash some cold water on hard landing concerns. Hiring is slowing down—the last 3 months have averaged a 116K pace compared to last year’s 251K pace— but this seems more representative of a catch-up in labor supply than a deterioration in labor demand.
Among the highlights:
➡️ The unemployment rate, which the Fed has vowed to prevent further increases in, dipped to 4.22% from 4.25%. This was driven by a reversal in the number of people on temporary layoff by 190K, mostly offsetting last month’s increase.
➡️ Zooming out, unemployment because of new entrants is not all that bad. Unemployment has risen by 847K so far this year (which is not insignificant), but continuing claims for unemployment insurance are only up by 79K and JOLTS layoffs up by 155K. The discrepancy? The labor force has added 1.1m people in the same time frame, and if we consider a back-of-the-envelope estimate of 2.6 million more employed workers from immigration from 2022 to 2024, recent increases in the unemployment rate seem much more explained by the denominator than the numerator.
➡️ Yes kids are back to school, but parents are back to work! Prime-age male participation was very slow to recover from the pandemic (only surpassing its pre-pandemic rate last September), but last month it notched an all-time high of 90%. This month, prime-age female participation reached an all-time high as well of 78.4%.
The economy has surely come a long way since the pandemic’s red-hot recovery. The Fed is right to exercise caution... the beginning of a Fed easing cycle and the turning tide of an economic slowdown presents a consequential inflection point, but if they were to adopt an expeditious pace of easing, it may do more harm than good by fueling recession fears.
Regardless, Powell’s assertion that “the time has come for policy to adjust” rings even clearer today, and investors should position for a gradual easing cycle ahead.
Labor market showed signs of resilience in August.
But did the Fed act soon enough to head off a recession?
[supporting figures are in the comments section]
Businesses added a net 142,000 jobs in August, on par with the average for the past five months once downward revisions to June and July are taken into account. This is down from a monthly pace of nearly 200,000 new jobs over the past twelve months.
The unemployment rate was essentially unchanged from July, ticking down one-tenth of a percent to 4.2%
Industries adding the most jobs were construction and the leisure and hospitality sector. Manufacturing shed jobs, and its payrolls are essentially unchanged over the past year. This is consistent with other data that indicate flat manufacturing sector activity.
With these data, we are about where we should be, with the labor market continuing to soften, but not precipitously. This takes pressure off prices and is closing in on the "soft landing" that the Fed has been aiming for. If achieved that outcome would probably mean somewhat more job losses than we have seen so far, but no outright economic contraction.
The question is whether the Fed is acting too late to avoid a recession. They are widely expected to cut interest rates when they meet in a couple weeks, likely by a quarter point. This will encourage borrowing and spending, it will provide some relief to those households with high credit card debt, and support the suffering housing industry. But because of the lagged and uncertain effects of monetary policy, how much this cut—and the ones to follow—can head off more dramatic slowing remains to be seen.
#labormarkets#employmentsituation#jobs#unemployment#federalreserve#fed#interestrates
Investors contending with labor market’s slowing pains
The S&P 500 index is headed for its worst week of trading since April.
Fueling the #volatility are concerns that the Federal Reserve’s historic interest rate hikes aimed at fighting inflation over the past two years may have taken too large a toll on economic #growth.
A recent spate of macroeconomic data - including this week’s release of the JOLTS (Job Openings and Labor Turnover Survey) for July, ADP private payrolls and the Labor Department’s monthly nonfarm employment data for August - has made it clear that labor #markets are weakening.
Although slower growth is still growth (and not a #recession), if these decelerating trends continue, the likelihood of a hoped-for economic “soft landing” will decrease alongside them, making markets more volatile.
I had the opportunity to discuss these and related topics on this morning’s edition of CNBC Squawk Box.
Special thanks to hosts Becky Quick, Andrew Ross Sorkin and Joe Kernen for inviting me to participate.
#LITrendingtopics
August Payrolls: Bouncing Back
In today’s release of the August Employment Situation report payrolls growth picked up, the unemployment rate declined, but wage growth accelerated. Headlines:
1️⃣ Payrolls increased +142k persons in August, compared to July's +89k (revised down from 114k). Payrolls growth for June and July combined were revised down 86k persons. Trends in payrolls growth slowed recently towards the breakeven pace consistent with a 4.2% unemployment rate for the next 6 months (first chart 👇). Incorporating the Preliminary Benchmark revision makes this slowing less severe, however, and reflects instead a stabilizing labor market.
2️⃣ The unemployment rate decreased 0.1 percentage point to 4.2% in August. In three-digit terms the unemployment rate declined less from 4.253% in June to 4.221%. Household employment grew faster in August: from +67k persons in July to +168k persons, and the labor force participation rate did not change at 62.7%.
3️⃣ Wage growth over the month was +0.4% compared to +0.2% in July, and over the year equaled 3.8% in August from 2.9% previously.
Furthermore:
➡️ Now for the best news in today's report. Data on total and short-term unemployed and employed persons in August can be used to estimate the likelihood a person moved out of unemployment in the previous month (job-finding rate). Total unemployment declined whereas newly unemployed persons went down in August, resulting in a significant improvement of the job-finding rate for July: 52% of the unemployed in July were no longer unemployed by August (second chart 👇). Smoother job-finding rate trends also went up, towards 47%-48%.
➡️ Combining job-exit and job-finding rates gives an alternative unemployment rate consistent with stable in- and outflows. This rate has been rising ahead of official unemployment rate in 2024 suggesting a more negative outlook for unemployment (third chart 👇). However, the pace of increase in this rate eased in this report and is converging on the ‘balanced labor market’ rate, suggesting stabilization just above 4% might be ahead of us. This is also in line with the easing in payrolls growth trends towards a 4.2% unemployment breakeven pace.
➡️ Average hourly earnings for production and non-supervisory workers, even if we correct for the sectoral and skills composition of jobs growth over the month, grew faster again in August and the annual wage growth remains above the pace consistent with 2% inflation and closer to inflation expectations around 2.5% (final chart 👇).
Today’s data seems more in line with a gradual easing of the Fed's future policy rates given the lack of evidence for an imploding labor market and persistently elevated wage growth. Expect, starting at the September FOMC meeting, two to three 25bps rate cuts for the year.
More details see Macro Market Notes: https://lnkd.in/enziQZak#jobsreport#wages#federalreserve
The labor market continues to cool as the US economy added 142,000 jobs in August. This is a slight rebound over the July data – which was downwardly revised to 89,000 – yet it is the weakest August jobs report since 2017.
Earlier this week, JOLTS data showed that the number of job openings fell to 7.67 million – the lowest level since January 2021. The imbalance between available jobs and available workers that we’ve seen over the last few years has dissipated as the ratio of job openings to unemployed workers is now 1.1 – below 2019 levels.
With all eyes on the Fed’s September meeting and long-anticipated rate cuts now on the horizon, it will be interesting to see where new capital will flow and how long it will take. More than 40% of financial decision makers we polled in January said they would increase investment in workforce development if a lower interest rate environment were to unlock new capital. In this challenging labor market, greater investment of time and resources into workforce strategy will be paramount.
#JobsReport#LaborMarket#WorkforceStrategy
Fed Chair Powell is more worried about the #labor market than his peers, he wants to nail the soft landing. There will be heated debate over whether to cut 50 or 25 bps at the September #Fed meeting.
LinkedIn Top Voice. Economic analyst, survey maven, and trusted resource for Bankrate, Red Ventures, and beyond. Former president of two associations of journalists, The National Press Club and SABEW.
What to make of the job market, which is in flux?
Hiring is slowing with August payrolls rising by 142,000 jobs, above the average of the past three months which is just 116,000 jobs added.
The unemployment rate slipped 0.1% to 4.2% The long-term average for the U.S. is 5.7%. We're well below that level and hope it stays that way.
The question for the Federal Reserve: It is not whether to reduce interest rates, but by how much.
Here's my quick take:
TL;DR: A lukewarm BLS jobs report for the month of August. Nothing recessionary, but the job market continues to gradually trend in the wrong direction.
1/ If you were very worried about the job market after last month's jobs report, today's report is reassuring - there's been no recessionary step-change in the US labor market. But, on balance, the gradual-but-already-substantial cooling in the job market is unabated. We're going to need monetary policy to put a floor under hiring, and soon.
2/ Nonfarm payroll employment increased by 142K in August. Taken literally this is an OK number, but taking possible future revisions into account, there's a good chance we're now adding fewer than 100K jobs per month.
3/ The unemployment rate inched down from 4.25% to 4.22%. But it's gone up by 0.56 percentage points since January, and we'll probably wrap up the year north of 4.5%. Until hiring levels out (hopefully as a result of Fed easing) we're going to see it keep going up.
4/ The mix of unemployment continues to be quite dissimilar to pre-recessionary periods. We're not seeing a recent increase in unemployment due to permanent layoff, the main driver of recessionary unemployment. Not sure how long this can hold up, though!
5/ The strongest pillar in the labor market - prime working age employment - continues to hold up. The share of Americans age 25-54 with a job remained at 80.9%, matching its highest level since 2001. The divergence between employment and unemployment is also dissimilar to pre-recessionary periods.
6/ The share of the workforce working part-time for economic reasons continues to gradually creep up.
7/ The strongest job gains were in leisure & hospitality (+46K), health care & social assistance (+44K), and construction (+34K). These numbers may get revised down in the future, so caution warranted.
8/ The largest net job losses were in manufacturing (-24K), retail trade (-11K), and information services (-7K).
The job market is cooling…can we blame AI?
The August payrolls data showing fewer jobs added than expected, but wage growth was at the top end of the range +3.8%.
Could this fit the thesis that AI is slowing hiring while AI talent is demanding higher wages?
Not according to the New York Fed.
AI adoptions means companies are
> hiring, not firing…
> leaving wages unchanged
Surprising!
In fact what surprised me most was how few companies are using AI broadly…
- 25% of service companies surveyed
- 16% of manufacturing companies
Were talking generative AI chatbots, robotics, text/data analytics or voice recognition.
Of those using it…most are using free versions such as #chatgpt.
Anecdotally we hear of such things as Klarna using generative AI to do the work of 700 customer service employees. IBM talking of slower back office hiring necessary.
But dig into broader data and so far, this is not a wider trend it seems.
Of the services companies surveyed
- 10% laid off due to AI in the last 6 months, - 19% plan to hire due to AI in the next 6 months.
Crucially, most are planning to *retrain*
And wage expectations and changes are generally negligible due to AI.
See the full report here:
https://lnkd.in/e5rE6dGC
Is this what you’re experiencing?
What did you think to the labor data?
Lmk ✌️❤️
#jobs#payrolls#artificialintelligence#ai#tech#hiring#layoffs#wages
