August Jobs Report: Look Past Noisy Strike Signals, But Be Wary of Backward Revisions

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor’s Chief Economist Aaron Terrazas.

Payroll growth beat forecasts in August, with employers adding 187,000 jobs despite gloomy forecasts amid ongoing strikes and recent high profile bankruptcies. But beneath the surface there were large downward revisions to June and July’s already low jobs gains suggesting that the labor market is on shakier foundations than the previously assumed glide path. The unemployment rate increased, returning to the upper bound of the range where it has been for much of the past year.

Payroll Employment Gains Accelerated on Downward Revisions to Last Month

Payroll employment grew by 187,000 in August, up from the downwardly revised 157,000 jobs added in July (initially reported as +187,000) and from the 105,000 jobs added in June. Absent the downward revisions to the July data, payrolls would have been flat. 

Recent standout sectors continued to drive job growth with healthcare (+71,000 jobs added), leisure and hospitality (+40,000), social assistance (+26,000) and construction (+22,000) leading the pack.

Transportation and warehousing shed 34,000 jobs – though the majority of that decline was likely attributable to a major industry bankruptcy in late July.  The information sector also lost jobs (-15,000), driven by the motion picture and sound recording industry which is experiencing an ongoing strike covering about 16,000 workers by BLS estimates. If all the striking workers in the motion picture industry were to return to work, the sector would have posted approximately a payroll gain of about +1,000 jobs. Smoothing past these two one-off factors on the transportation and information sectors would have pushed August payroll gains above 200,000 – which is generally considered strong job growth for the U.S. economy.

Unemployment Rate Increases, Unemployment Level Near a Two-Year High

The unemployment rate ticked higher in August to 3.8 percent from 3.5 percent and the number of unemployed workers increased by 514,000 to 6.4 million, the highest number of unemployed workers since November 2021. There were significant increases in the unemployment rates for adult men, White workers, and Asian workers. Unemployment has been remarkably muted given the sharp increase in interest rates over the past year. The historical relationship between unemployment and interest rates would suggest an unemployment rate 0.5-0.7 percentage points higher than it currently is.

Though the nationwide unemployment rate is stable, state and local unemployment data through July released earlier this week show a meaningful increase in the unemployment rate in key technology-focused metros including by 0.7 percentage point to 3.4 percent in San Francisco, CA; by 0.9 percentage point to 3.4 percent in San Jose, CA; and by 0.7 percentage point to 3.5 percent in Austin, TX. These increases are consistent with conventional signals of a local recession.

Labor force participation increased by 0.2 percentage point to 62.8 percent – its highest reading since the pandemic. The prime age (25-54) labor force participation rate hit 83.5 percent, recovering to its June 2023 level after a small dip in July. That matches the highest participation rate for this group since May 2002.

Wage Growth Slows Slightly

Wage growth slowed slightly to 4.3 percent in August from 4.4 percent in July.  Recent commentary from Federal Reserve officials suggests that, while there is little evidence that wage pressures are driving broader inflation trends, consumer price inflation remains too far above the central bank’s target.

Conclusion

August jobs data provide a noisy pulse on a rapidly shifting labor market. While payroll gains were likely muted by transitory disruptions to the economy, there are distinct signals of a softening jobs markets in still-contained pockets of the economy. The share of employees who report a positive six-month outlook for their businesses is at its lowest level since 2017. The economy may still be on a glide path to a soft landing, but it may not feel cushy to communities accustomed to more.

More Insights

Payrolls grew 187,000 in August, an acceleration from June and July, but those prior months were also revised down fairly significantly.

The Hollywood strikes and Yellow bankruptcy did crimp job gains in August with truck transportation losing 36,700 jobs and motion picture and sound recording industries (part of the information sector) losing 16,800 jobs.

Growth in average hourly earnings ticked down slightly to 4.3 percent year-over-year offset by an increase in average weekly hours to 34.4, which helped boost average weekly earnings.

The unemployment rate rose to 3.8 percent in August, the highest since February 2022. While currently the rate is still at a historically low level, a further rise would be a potential recession indicator to watch out for.

The rise in the unemployment rate was partially driven by an increase in labor force participation which is now at its highest level since the pandemic began.

Prime age labor force participation also remains tied for its highest level since 2002.

The Black unemployment rate ticked down to 5.3 percent in August, reversing some of the surge in Q2 2023, but also not quite returning back to the low from April 2023.

Absences due to illness also rose in August, continuing a 3-month streak. While this measure had dropped back to pre-Covid levels at the start of the summer, we are seeing an increase now as Covid cases rise again.