Total nonfarm payrolls rose last month by just 142,000. The growth was slightly below economists’ projections prior to yesterday’s data release on this by the U.S. Bureau of Labor Statistics.
That is higher than July’s increase of 114,000, but not enough to change the long-term trajectory of the economy to a slower-growth state compared to the previous two years.
Job growth was also lower than the average monthly job growth of 202,000 recorded since September 2023.
There are also fears the BLS may revise August’s hiring data downwards a month from now, just as it did multiple times earlier this year. It suggests not just inaccuracy in gathering the original data but also that there is a more severe downward trend in the economy than the initial reports would indicate.
The official government unemployment dropped by 1 percentage point from July’s 4.3% figure down to 4.2%. That too is of concern because it does not include growing numbers of those who have been looking for work for a long time but given up continuing to look for jobs. The official rate also does not account for those who lost part-time jobs, a category of work which is an increasing percentage of the labor force as people work extra hours in various lower-paying roles just to make ends meet.
In a slight surprise, construction employment gains topped the payroll increase lists last month. This sector of the economy added 34,000 new positions. That was well above the average hiring rate of 19,000 for this area since a year ago. The two subsegments which made the largest contribution to this sizeable gain were heavy and civil engineering construction, which brought in 14,000 new employees, and in nonresidential specialty trade contractors with another 14,000.
Health care, which continued to track as one of the highest contributors to new employment as well, saw its hiring rise by 31,000 last month. Within this area, ambulatory health care services (+24,000) and hospital staff hiring (+10,000) showed the biggest increases. Health care hiring has eased significantly compared to the entirety of last year, when average monthly numbers moved upwards by 60,000.
Social assistance jobs came in third in the employment growth segments last month, but at the substantially reduced rate of just 13,000 additions compared to the mean growth rate for this area of 21,000 for the previous twelve months. Individual and family services saw the highest subcategory gains here, with 18,000 new employees.
Manufacturing employment, which in recent months has remained relatively stable though slow, showed one of the bigger hiring declines of any segment of the economy this time. Employment in this area fell by 24,000 for August. That was driven mostly by a loss of 25,000 jobs in the durable goods subcategory.
All other major hiring areas in the economy were mostly unchanged last month. Those categories include financial activities; federal and local governments; information; the usually robust leisure and hospitality sector; mining, quarrying, and oil and gas extraction; other services; professional and business services; retail trade; transportation; and wholesale trade.
Despite the relatively soft jobs market for August, the number of those without jobs who are still reported as actively looking for a position remained flat at 5.6 million. The number of those who have been looking for jobs for more than half a year was also unchanged at 1.5 million. Temporary layoffs were down a bit this time, by 190,000 this time. Those three numbers contributed to the only 0.1 percentage point drop in total unemployment from July to August.
Those calculations did include a more serious hidden warning sign, however. When one adds into to the official unemployment numbers those workers who have dropped out of the labor market because they did not believe they could find jobs, the so-called “discouraged workers” group, and for those employed in part-time jobs (which do not show up in the official Bureau of Labor Statistics analysis but area available) because they need the extra income and which saw job losses as well this time, the so-called “real” unemployment rate pushed upwards this month to 7.9%. That was the highest this version of the unemployment number has been since October 2021, just shy of three years ago.
Curiously, nonfarm average hourly wages increased by 14 cents to $35.21 this time, for a net gain of 0.4% for the month, one of the highest increases in some time. Average hourly wages averaged an increase of 3.8% annually over the last year.
Soon after the jobs report was released, economists piled on with concerns about what the continued sluggish growth might mean for the economy, as well as what the government should do about it.
"The August employment report reinforced the sense of waning vigor in labor market activity," wrote JPMorgan Chief Economist Michael Feroli about the newest data.
He went on to urge the Federal Reserve Board, which via Chair Jerome Powell just last week signaled a high likelihood of issuing its first bank lending rate cut since 2021 starting this month, to consider making the biggest cut possible to prevent the economy from stumbling into a recession.
"We still think cutting 50 [basis points] at the September meeting is the right thing to do. Policy is restrictive, downside employment risks are growing, and upside inflation risks are ebbing," Feroli said.
Dan North, Allianz Trade’s senior economist for North America, expressed his serious concerns with the latest numbers as well.
“I don’t like this a whole lot. It’s not disaster, but it’s below expectations on the headline, and what really bothers me is the revisions,” he wrote. “This is certainly going the wrong way.”
The revisions North is referring to are the constant downward adjustments in hiring numbers the Bureau of Labor Statistics (BLS) has been making over the last few months, just weeks after much higher values were originally reported. As one example, May’s hiring numbers were readjusted downwards from 218,000 net adds to 216,000 two months after they were originally reported by the BLS. June’s numbers were ratcheted down by an even more serious 27,000 cut from the original 206,000 hiring total when they were re-figured as part of the early August 2024 jobs report.
North did not say it explicitly, but his comments suggest he is concerned even the current 142,000 jobs increase numbers will soon also be reduced downwards, pointing to an economy softening even faster than most realize.
Meanwhile in the White House, Joe Biden pointed to the continued low unemployment rate as the best part of the news.
Biden’s chair of the White House’s Council of Economic Advisers, Jared Bernstein, took an even more “rose-colored glasses” view of the situation in a press interview yesterday about the new jobs report.
“It’s a solid report with decent job gains, wage growth beating price growth, and an important tick down in the unemployment rate,” Bernstein said. “Simply put, we’ve got jobs and wages up, and inflation and unemployment down.”
That very positive statement stands in stark contrast to the comments by Allianz Trade’s North and JPMorgan’s Feroli. The truth is the economy is slowing, and most analysts – as well as stock traders – agree with that position.
The Dow Jones fell 410 points on the latest jobs data yesterday. The S&P 500 also fell by 1.7% and NASAQ lost 2.6% of its market value at market close.