The August 2023 jobs report from the Bureau of Labor Statistics shows a mixed picture of the U.S. labor market. Total nonfarm payroll employment rose by 187,000, slightly below economists’ forecasts of 200,000 jobs added. The unemployment rate ticked up to 3.8% in August from 3.5% in July. Average hourly earnings growth moderated to 0.2% for the month.
While job gains continued in August, the pace of growth slowed from previous months. The health care sector saw the largest increase with 71,000 jobs added, followed by leisure and hospitality and social assistance. However, employment in retail trade declined.
The rise in the unemployment rate was attributed to more people returning to the labor force and looking for work. The labor force participation rate inched up 0.2 percentage points to 62.8% in August. The number of long-term unemployed edged up as well.
Wage growth remains positive but has cooled from recent months. Average hourly earnings were up 0.2% in August, lower than the 0.3% growth in July. On a yearly basis, wages were up 5.2% in August compared to 5.5% in the previous month. The moderation in wage growth may ease some inflationary pressures.
Overall, the August employment report portrays a still-growing but likely cooling labor market. Job gains continue but appear to be slowing. The rise in unemployment and slower wage growth point to softening momentum.
The Federal Reserve will likely evaluate the moderating wage and job gains as steps in the right direction as it battles high inflation through monetary policy tightening. However, the Fed will want to see clearer signs of an easing labor market before pausing its rate hike plans.
