U.S. Labor Market Strengthens but Remains Somewhat Soft
U.S. job growth picked back up in August while the unemployment rate ticked lower. Still, hiring among U.S. employers was weaker than expected and major downward revisions were made for June and July. The softer job market could signal the Fed to cut interest rates on September 18th.
Employers added roughly 142,000 workers to payrolls in August 2024, according to a survey of businesses by the Bureau of Labor Statistics. Those additions came in higher than the 89,000 jobs gained in July (which was revised down) and were slightly below what economists were forecasting (160,000 to 165,000 jobs). Still, the U.S. economy has now added jobs for 44 consecutive months, the fifth-longest period of job base expansion on record dating back to 1939.
Of note: The job counts for June and July were revised down. Downward revisions to June 2024 data showed 61,000 fewer jobs were added than previously reported, down to 118,000 positions. The July 2024 job growth number was revised down by 25,000 jobs to a total of 89,000 positions. With these revisions, employment gains in June and July combined were 86,000 jobs lower than previously reported.
Job gains in August were considerably lower than the monthly average of around 202,000 jobs added over the previous 12 months and came in below pre-pandemic norms. From 2015 to 2019, the U.S. economy added an average of roughly 190,000 jobs each month.
On an annual basis, the nation gained roughly 2.36 million jobs as of August 2024. That was the weakest annual gain in over three years and registered slightly under the pre-pandemic average of around 2.4 million jobs added annually from 2015 to 2019.
The U.S. economy has recovered all the net jobs lost during the COVID-19 pandemic. As of August, the nation had 6.47 million more jobs (+4.2%) compared to the pre-pandemic employment level from February 2020.
Jobs by Industry
All but three of the 11 major industry sectors gained jobs in August. The most notable job base expansions were in Education and Health Services (+47,000 jobs) and Leisure and Hospitality Services (+46,000 jobs). Notable gains were also recorded in Construction (+34,000 jobs) and Government (+24,000 jobs). Smaller gains were seen in Financial Activities (+11,000 jobs), Professional and Business Services (+8,000 jobs), Trade, Transportation and Utilities (+2,000 jobs) and Other Services (+1,000 jobs). On the other hand, notable job loss was recorded in Manufacturing (-24,000 jobs), while Information (-7,000 jobs) was the only other sector to lose jobs in August. There was essentially no change in the Mining and Logging industry.
Most major industries have recovered all the jobs lost during the COVID-19 pandemic downturn. Education and Health Services has seen the best recovery, with the August 2024 job count coming in roughly 1.86 million positions ahead of February 2020 numbers, followed by Professional and Business Services (+1.54 million jobs). Also well ahead of pre-pandemic norms was Trade, Transportation and Utilities (+1.32 million jobs).
The Leisure and Hospitality Services sector, which was the hardest-hit sector during the pandemic, has recouped all the jobs lost during that downturn. As of August, that sector had 77,000 more jobs than in February 2020, but that was just a 0.5% increase in the job base.
The Mining and Logging and Other Services sectors have yet to recover all the jobs lost during the COVID-19 downturn. The Mining and Logging industry was 49,000 jobs below its February 2020 level, while Other Services was 30,000 jobs in the hole as of August 2024. That put the August employment count in Other Services 0.5% below the pre-pandemic level, while the job base in Mining and Logging was 7.2% below the February 2020 count.
Unemployment
The unemployment rate (the U3 or headline unemployment rate, which is seasonally adjusted, is a survey of households) fell 10 basis points (bps) from July to August, registering at 4.2%, the second-highest level since October 2021, but in line with economists’ expectations. The decline in the unemployment rate came amid a labor force participation rate that was essentially unchanged from July to August at 62.7%, as only 120,000 more people entered the labor force which had a negligible impact on that rate.
The unemployment rate registered below 4% from February 2022 to April 2024, averaging 3.6% during that period. At the onset of the pandemic, the unemployment rate climbed to 14.8% in April 2020. Prior to the pandemic, the unemployment rate clocked in at 3.5% to 5.7% from 2015 to 2019, averaging 4.4% during that five-year period. Prior to 2023, the unemployment rate hadn’t registered below 3.5% since 1969.
The total number of unemployed persons in the U.S. registered at roughly 7.11 million in August, down from about 7.16 million in July.
The unemployment rate for adult men (20 years and over) was unchanged from July to August, at 4%. The unemployment rate for adult women (20 years and older) fell 10 bps to 3.7%. Meanwhile, the unemployment rate for teenagers (16 to 19-year-olds) jumped 170 bps, from 12.4% in July to 14.1% in August.
Average Hourly Earnings
Average hourly earnings among employees on private nonfarm payrolls rose $0.14 (+0.4%) from July to August. That monthly increase took average hourly earnings to $35.21 in August. On an annual basis, average hourly earnings were up $1.30, a 3.8% increase year-over-year. Overall wage growth continues to surpass rising prices, as the Consumer Price Index rose 2.9% annually in July. The Fed’s target for inflation is currently at 2%.
Wage growth over the past year was strong across most major industries. The largest increases in earnings from August 2023 to August 2024 were recorded among workers in Manufacturing (4.9%), Financial Activities (4.6%), Construction (4.4%), Professional and Business Services (4.3%), Leisure and Hospitality Services (4%) and Mining and Logging (3.8%). Smaller increases were among employees in Trade, Transportation and Utilities (3%), Education and Health Services (3.1%), Other Services (3.6%) and Information (3.7%).
