Key takeaways
- The Bureau of Labor Statistics (BLS) reported that the U.S. economy added 142,000 jobs in August 2024, 28,000 more than in July. That said, job growth over the prior two months was revised down by 89,000 jobs. Private payrolls increased by 118,000.
- The unemployment rate fell a tenth of a percent to 4.2%, driven by a reversal of the temporary layoffs that were present in the July jobs report.
- Wage growth came in slightly above expectations, up 3.8% year-over-year, which is consistent with Federal Reserve Chairman Jerome Powell’s comments at Jackson Hole that the labor market currently isn’t posing an inflationary threat.
- The August employment report reinforces the view that the U.S. labor market is slowing but not breaking. It also appears that the “hard landing” sell-off following the July jobs report was perhaps an overreaction.
- This leaves the Fed in a position of comfort for a rate cut at the Federal Open Market Committee (FOMC) meeting later this month. Immediately after the print, markets slightly increased the odds of a 50-basis-point move.
Contributors
Cristina Dwyer
Analyst, J.P. Morgan Wealth Management
The August employment report reinforces the view that the U.S. labor market is slowing but not breaking. It also appears that the “hard landing” sell-off following the July jobs report was perhaps an overreaction.
Nonfarm payrolls missed expectations but increased to a robust 142,000. Private nonfarm payrolls additionally came in stronger than the prior month at 118,000.1
That said, nonfarm payroll gains for June and July were revised down a net 86,000. These downward revisions bring the three-month average employment gain to 116,000.2 This marks the lowest reading since the pandemic when there were outright job losses and underscores our view that economic growth is cooling.
U.S. nonfarm payroll employment
In thousands
This chart shows the monthly nonfarm payroll employment change in thousands from April 2023 to August 2024. The chart has two lines representing the 3-month moving average and 2018-2019 average monthly change at the level of 178,000.
- In April 2023, the nonfarm payroll was 278,000 and the 3-month moving average was 237,000;
- In May 2023, the nonfarm payroll was 303,000 and the 3-month moving average was 273,667;
- In June 2023, the nonfarm payroll was 240,000 and the 3-month moving average was 273,667;
- In July 2023, the nonfarm payroll was 184,000 and the 3-month moving average was 242,333;
- In August 2023, the nonfarm payroll was 210,000 and the 3-month moving average was 211,333;
- In September 2023, the nonfarm payroll was 246,000 and the 3-month moving average was 213,333;
- In October 2023, the nonfarm payroll was 165,000 and the 3-month moving average was 207,000;
- In November 2023, the nonfarm payroll was 182,000 and the 3-month moving average was 197,667;
- In December 2023, the nonfarm payroll was 290,000 and the 3-month moving average was 212,333;
- In January 2024, the nonfarm payroll was 256,000 and the 3-month moving average was 233,667;
- In February 2024, the nonfarm payroll was 236,000 and the 3-month moving average was 264,667;
- In March 2024, the nonfarm payroll was 310,000 and the 3-month moving average was 267,333;
- In April 2024, the nonfarm payroll is 108,000 and the 3-month moving average was 218,000;
- In May 2024, the nonfarm payroll is 216,000 and the 3-month moving average is 211,333;
- In June 2024, the nonfarm payroll is 118,000 and the 3-month moving average is 147,333;
- In July 2024, the nonfarm payroll is 89,000 and the 3-month moving average is 141,000;
- In August 2024, the nonfarm payroll is 142,000 and the 3-month moving average is 116,333.
Source: Bloomberg Financial L.P. Data as of September 6, 2024.
Industry breakdown
August’s nonfarm payroll gains were driven by construction (+34,000) and health care employment (+31,000). There were also strong gains in social assistance (+13,000) jobs.3
Private sector employment rose by 118,000 and government jobs rose by 24,000. Job gains in the health care sector have been trending slower recently, and increased by only 44,000 last month, the softest since early 2022.4
A surprising 24,000 decline in manufacturing jobs, in particular within transportation equipment, prevented nonfarm payrolls from meeting economists’ expectations. Motor vehicles related jobs accounted for around a quarter of the manufacturing job losses – however, we expect these jobs to rebound in September as summer auto manufacturing plant shutdowns subside.5
Jobs were little changed among other industries, including mining, quarrying, oil and gas extraction, retail trade and more.6
Monthly change in payrolls by industry – August 2024
Thousands
This chart shows the monthly change in payrolls by industry in thousands of August 2024.
- The biggest decline in August was in manufacturing jobs of 24,000, which was concentrated in transportation equipment, with motor vehicles accounting for about a quarter of the decline.
- Retail trade jobs declined 11,000 in August;
- Information services jobs declined 7,000 in August;
- Utilities jobs unchanged;
- Mining jobs unchanged;
- Other services jobs rose 1,000;
- Educational services jobs rose 3,000;
- Wholesale trade jobs rose 5,000;
- Transportation jobs rose 8,000;
- Professional and business jobs rose 8,000;
- Financial activities jobs rose 11,000;
- Government jobs rose 24,000;
- Construction jobs posted a solid increase of 34,000;
- Healthcare jobs posted an increase of 44,000;
- Leisure and hospitality posted an increase of 46,000.
Source: Bloomberg Financial L.P. Data as of September 6, 2024.
Unemployment rate ticked down
The unemployment rate fell a tenth of a percent to 4.2% in August, highlighting the labor market is not decelerating as quickly as forecasted. This fall was driven by a reversal of the temporary layoffs (down 190,000) from the July jobs report. This brings the total rise in workers temporarily laid off to 249,000 and signals healthier labor market demand.7 The spread of temporary workers was broad-based and largely attributable to seasonal factors.
The labor force increased by 120,000 in August, significantly weaker than the 420,000 jump in July. Employment in the household survey and household employment both rose by 168,000. The labor force participation rate was unchanged at 62.7%, with no changes to prime age employment (i.e. workers aged 25 to 54).8
The 4.2% unemployment rate continues to trigger the Sahm rule,9 which signals the start of a recession when the three-month average unemployment rate is 0.5% or more above the three-month average within the past year – although, our strategists are less concerned about this signal given the unemployment rate hasn’t been accompanied by a steep increase in workers with permanent job losses.
Wage growth and average hours worked rose slightly
Wage growth came in slightly above expectations, with average hourly earnings up by a robust 3.8% YoY.10 This moderate print is consistent with Powell’s comments at Jackson Hole that the labor market currently isn’t posing an inflationary threat.11 Likewise, the majority of wage growth measures show wage growth that is consistent with the Federal Reserve’s (Fed) 2% inflation target.
On another positive note, average hours worked in a week recovered to 34.3 from 34.2. Rises in the workweek are typically associated with an increase in labor demand.12
Job openings fell
The number of job openings fell to 7.7 million in July from a revised down 7.9 million in June, according to the BLS Job Openings and Labor Turnover Summary.13 This survey fell to the lowest reading since January 2021 and indicates labor demand continues to moderate.
Rate implications
The Fed has dual mandates: 1) to achieve price stability, and 2) maximum employment. Raising and keeping interest rates elevated has been the Fed’s main transmission mechanism to slow economic growth, with the goal of cooling inflation. Given recent compelling readings that show inflation is moving closer to its 2% target, the Fed’s attention has shifted more toward the labor market.14
Therefore, August’s jobs report is likely to be a major factor in the Fed’s decision at the September FOMC meeting to cut interest rates. The report mitigates concerns of a sharp slowdown in the labor market and raises the likelihood of a soft economic landing.
This leaves the Fed in a position of comfort for a rate cut at the Federal Open Market Committee (FOMC) meeting later this month. Worth noting, immediately after the print, markets slightly increased the odds of a 50-basis-point move.
As we inch closer to a potential rate cut, our strategists expect the Fed to carefully assess upcoming data prints. The August Consumer Price Index report, set to be released on September 11, and the Personal Consumption Expenditures (PCE) deflator (the Fed’s preferred measure of inflation), set to be released on September 27, will likely play large roles in the Fed’s decision-making.
References
Bureau of Labor Statistics (BLS), “The Employment Situation—August 2024.”
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Federal Reserve Bank of St. Luis, “Sahm Rule Recession Indicator.”
Bureau of Labor Statistics (BLS), “The Employment Situation—August 2024.”
Board of Governors of the Federal Reserve System, “Review and Outlook.” (August 23, 2024)
Bureau of Labor Statistics (BLS), “The Employment Situation—August 2024.”
BLS, “July Job Openings and Labor Turnover Summary.” (July 2024)
Federal Reserve, “Federal Reserve issues FOMC statement.”
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