August Jobs Report: A Steady State for the Labor Market

Introduction

Last month, the Bureau of Labor Statistics delivered a jobs report that was neither too hot nor too cold, but just right. The US economy added 187,000 jobs in July, roughly in line with the monthly average seen in the decade before the pandemic. The unemployment rate settled back down to 3.5%. The August jobs report, set to be released on Friday, is expected to show that the labor market will stay in this sweet spot.

Consensus Estimates

• Net job gains estimated at 170,000
• Unemployment rate expected to hold at 3.5%

Steady State of the Economy

The current state of the economy and recent history support a belief that this steady state can be maintained. The labor market has shown sustainable numbers that lead to gradual real wage growth and increases in prime-age participation rates. This expansion of the workforce and tax base has long-term benefits.

Concerns Remain

While the economy is still growing, the pace of growth is moderating. There are concerns about rising credit card debt, delinquencies, and student loan payments. Interest rates and mortgage rates are at their highest in 22 years. Community banks’ loan growth has slowed, which is a concern for small businesses.

Fed’s Battle Against Inflation

The Federal Reserve has been wanting to see more slack in the labor market to bring down inflation. Rapid wage growth could add upward pressure on inflation. The Fed may raise interest rates further to combat this, which could potentially lead to a recession.

Job Openings and Labor Turnover Survey

The Job Openings and Labor Turnover Survey report for July showed a slow calming of the economy. Job openings fell to their lowest since March 2021, hiring activity slowed, and fewer workers quit their jobs. This indicates a resetting of the job market after the pandemic and post-pandemic hiring frenzy.

Private Payroll Data

Private payroll data released by ADP showed a cooling in August, with a sharp pullback in hiring. Job openings are falling, and workers are more reluctant to leave their positions. The job market is resetting after the pandemic.

Job Cuts

In August, US companies announced 75,151 job cuts, with the bulk of the cuts occurring in the warehousing industry due to the bankruptcy of a trucking company. However, this is an upswing from the previous months.