In a surprising turn of events, the U.S. economy added 187,000 jobs in August, surpassing economists' expectations of 170,000 additional jobs.[0] This positive news comes amidst concerns about a cooling labor market and rising unemployment rates. The Department of Labor reported that the unemployment rate jumped sharply to 3.8%, the highest since early last year.
The increase in job growth is a hopeful sign for investors and Americans who have been eagerly anticipating the Federal Reserve's decision to ease up on interest rate hikes.[1] Nonfarm payrolls grew by a seasonally adjusted 187,000, exceeding the Dow Jones estimate of 170,000.[2]
However, while jobs were on the rise, the unemployment rate also increased by 0.3% from July to 3.8%. Average hourly earnings saw a meager 0.2% increase in the month to $33.82, a disappointing figure for workers.[3] The rate of people quitting their jobs, an indicator of workers' confidence in the job market, fell to pre-pandemic levels, suggesting a loss of advantage for workers in the labor market.[4]
Despite the positive job growth, other indicators point to a cooling labor market. The number of job openings fell to 8.8 million in July, the lowest level since March 2021.[5] This equates to 1.5 job openings for every unemployed worker, a decrease from the peak of two jobs-per-worker in March 2022.[5] However, it is still higher than the pre-pandemic rate of 1.2 jobs per worker.[6]
The increase in the number of employed Americans has led to a surplus in labor supply, with more people looking for jobs than there are openings. This is a significant shift from 2022 when labor demand exceeded labor supply, resulting in more job openings than people willing to fill them.
The unexpected rise in the jobless rate came as the labor force participation rate increased to 62.8%, the highest since February 2020, just before the Covid-19 pandemic.[7] The total labor force size also increased by 736,000.[8]
While the nonfarm payrolls growth continues to defy expectations, previous months' counts were revised considerably lower.[9] The July estimate was revised down by 30,000 to 157,000, and June was revised lower by 80,000 to 105,000.[9]
Despite the positive job growth, the Federal Reserve is carefully monitoring the situation as they determine the future course of monetary policy. Market expectations suggest that the Fed will skip a rate increase at its September meeting but may still consider a final hike in October-November.[9]
The moderation in wage growth and resilient hiring bring positive news for the Fed as it signals that price stability may be restored without sacrificing the economy.[10] The current pace of job growth suggests that the labor market should be able to absorb an increase in the participation rate without a significant rise in unemployment.[11]
Overall, the job growth in August provides some optimism for the U.S. economy. However, with concerns about cooling labor market conditions and rising unemployment rates, policymakers will need to carefully navigate the path forward to ensure a smooth transition and avoid a recession.
0. “US adds 187K jobs in August, jobless rate rises to 3.8 percent” The Hill, 1 Sep. 2023, https://thehill.com/business/4182653-us-adds-187k-jobs-in-august-jobless-rate-rises-to-3-8-percent/
1. “U.S. Added 187,000 Jobs In August As Unemployment Rises To 3.8%” Forbes, 1 Sep. 2023, https://www.forbes.com/sites/darreonnadavis/2023/09/01/us-added-187000-jobs-in-august-as-unemployment-rises-to-38/
2. “US Payrolls Rise by More Than Forecast While Wage Growth Cools” Bloomberg, 1 Sep. 2023, https://www.bloomberg.com/news/articles/2023-09-01/us-payrolls-rise-by-more-than-forecast-while-wage-growth-cools
3. “Jobs Report: Solid Hiring As Wage Growth Ebbs Is Near Perfect; S&P 500 Wavers” Investor's Business Daily, 1 Sep. 2023, https://www.investors.com/news/economy/jobs-report-solid-hiring-as-unemployment-jumps-sp-500-rises/
4. “U.S. job market returns to “normal”, employment data shows” Axios, 30 Aug. 2023, https://www.axios.com/2023/08/30/labor-market-pre-pandemic-covid-jobs
5. “Biden hails strength of economy as US adds 187,000 jobs in August” The Guardian, 1 Sep. 2023, https://www.theguardian.com/business/2023/sep/01/us-jobs-report-august-2023-inflation
6. “The Great Resignation Is Officially Over” Investopedia, 29 Aug. 2023, https://www.investopedia.com/the-great-resignation-is-officially-over-7963266
7. “Nonfarm Payrolls rise 187,000 in August vs. 170,000 anticipated” FXStreet, 1 Sep. 2023, https://www.fxstreet.com/news/nonfarm-payrolls-forecast-us-labor-market-expected-to-show-further-signs-of-cooling-in-august-202309010600
8. “Labor Force Spikes, Wage Pressures Stuck at High Levels, Job Market Sorts Out the Distortions from the Pandemic” WOLF STREET, 1 Sep. 2023, https://wolfstreet.com/2023/09/01/labor-market-sorts-out-the-distortions-from-the-pandemic-labor-force-spikes-wage-pressures-stuck-at-high-levels/
9. “U.S. economy added 187,000 jobs in August, more than was expected” NBC News, 1 Sep. 2023, https://www.nbcnews.com/business/business-news/us-added-187000-jobs-august-was-expected-rcna102946
10. “August Jobs Report: Payrolls Rise by 187K, Setting Gold and USD on Opposite Paths” DailyFX, 1 Sep. 2023, https://www.dailyfx.com/news/forex-august-jobs-report-payrolls-rise-by-187k-setting-gold-and-usd-on-opposite-paths-20230901.html
11. “The good news about the rising US unemployment rate” Quartz, 1 Sep. 2023, https://qz.com/the-good-news-about-the-rising-us-unemployment-rate-1850797224
