U.S. Employment Disappoints in August; Jobless Rate Eases

Nonfarm payrolls increased 142,000 (1.5% y/y) during August after rising 89,000 in July, revised from 114,000. During June, payrolls rose 118,000, revised from 179,000 while May payrolls rose an unrevised 216,000. Expectations had been for a 162,000 August increase in the Action Economics Forecast Survey.

Average hourly earnings strengthened 0.4% in August following unrevised gains of 0.2% and 0.3% in the prior two months. The y/y earnings increase improved to 3.8% from 3.6% in July, but was below the 5.9% high in March 2022.

The unemployment rate, measured in the household survey, eased to an expected 4.2% in August from 4.3% in July. It remained near the highest level since October 2021 after having reached a low of 3.4% in April of last year. Household employment rose 168,000 after increasing 67,000 in July. The labor force increased 120,000 after a 420,000 July rise. The overall unemployment rate, including workers who were marginally attached & working part-time for economic reasons, rose to 7.9% from 7.8% in July. It was the highest rate since October 2021.

In the payroll survey, private-sector employment increased 118,000 (1.4% y/y) in August after rising 74,000 in July. Construction sector employment increased 34,000 (2.8% y/y) last month after rising 13,000 in July. Factory sector payrolls offset this rise with a 24,000 decline (-0.1% y/y) after a 6,000 in July increase. Mining & logging sector jobs held steady (-1.2% y/y) after a 1,000 July increase.

Private service-producing sector employment increased 108,000 in August (1.5% y/y) after a 54,000 July rise. Employment changes varied greatly amongst service sector categories. Education & health service jobs rose 47,000 (3.9% y/y) following a 55,000 July rise while leisure & hospitality employment rose 46,000 (1.7% y/y) after a 24,000 gain. Professional & business service jobs improved 8,000 (0.4% y/y) after falling 13,000 in July. Within that category, the number of temporary jobs declined 2,900 (-5.8% y/y) and have fallen consistently since a March 2022 high. Trade, transportation & utilities employment gained 2,000 (0.7% y/y) after rising 9,000 as the number of retail jobs fell 11,100 (+0.4% y/y). Financial activities jobs rose 11,000 (0.4% y/y) after falling 1,000 in July. Information sector employment fell 7,000 (+0.1% y/y) after weakening 15,000 in July.

Government sector payrolls increased 24,000 last month (1.9% y/y) after 15,000 July increase. Local government jobs rose 22,000 (1.8% y/y) after July’s rise of 5,000, while state government employment edged 1,000 higher (2.3% y/y) after a 10,000 gain. The number of federal government jobs also inched 1,000 higher (2.0% y/y) after holding steady in July.

The 0.4% August rise in private-sector average hourly earnings reflected a 0.3% gain (4.7% y/y) in the goods-producing sector which was the same as in July. Earnings in construction improved 0.3% (4.4% y/y) following a 0.4% gain while factory sector pay increased 0.4% (4.9% y/y) after rising 0.2%. In the private services-sector, earnings rose 0.4% last month (3.6% y/y) after a 0.2% gain. Professional & business service sector earnings grew 0.4% (4.3% y/y) for the third time in four months. Leisure & hospitality earnings improved 0.2% (4.0% y/y) while information sector earnings strengthened 0.9% (3.7% y/y) after rising 0.4% for three straight months. Financial sector earnings rose 0.6% (4.6% y/y) after a 0.3% gain. Private education & health services earnings improved 0.2% (3.1% y/y), the same as in July. Trade, transportation and utilities pay rose 0.5% (3.0% y/y) in August after edging 0.1% higher in July.

The length of the average workweek in the private sector edged up to 34.3 hours in August from 34.2 in July. The workweek in the goods-producing sector of 39.8 hours last month compared to 39.7 hours in July. The construction sector average workweek lengthened to 39.0 hours from 38.9. The factory sector workweek improved to 40.0 hours from 39.9 while the average workweek in the private service sector remained at 33.2 hours for the fifth straight month.

In the household survey, the decline in the jobless rate to 4.2% occurred as employment and the size of the labor force rose slightly. The labor force participation rate held at 62.7%. The rate for teenagers declined sharply for the third straight month from 38.1% in May to 35.7% last month, while for individuals aged 20-24, it also has fallen sharply to 70.5% from a high of 72.7% in January. For rate for workers aged 25-54, the rate eased to 83.9% but remained near the highest since 2001, and for workers 55 and over it rose to 38.6%, the highest level since March.

The employment/population ratio for all workers held steady at 60.0% in August and was slightly below where it was twelve months earlier. It remained below its high of 61.1% in February, 2020 just prior to the pandemic.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.