The August jobs report from the Bureau of Labor Statistics was well below expectations, with nonfarm payrolls adding just 235,000 jobs, less than a third of the consensus estimate.
The unemployment rate fell 0.2 percentage points to 5.2% while the labor force participation rate was unchanged at 61.7%. The number of unemployed declined to 8.4 million.
The private sector added 243,000 jobs in August, substantially below the preceding 3- and 6-month averages. The service sector continues to account for most of the nation’s job growth.
Professional and business services made up a third of August’s employment increase, adding 74,000 jobs.
Architectural and engineering services grew by 19,000 positions. Although construction was essentially unchanged, the gains in architectural and engineering services likely point to construction gains in the coming months.
Transportation and warehousing increased 53,000 in August. Employment in the industry is now 22,000 jobs above its February 2020 level, although the distribution of those jobs within the industry has greatly changed. Air transport added 11,000 of the 53,000 jobs last month.
Manufacturing gained 37,000 jobs in August, which is more growth than July but under expectations. The sector is still down 378,000 jobs from February 2020, before the government-imposed shutdowns.
Retail trade saw a large decline of 29,000.
Leisure and hospitality was unchanged, after increasing an average of 350,000 each month over the last six months. Gains elsewhere in the sector were offset by food services and drinking places, which lost 42,000. The sector is still down 1.7 million from February 2020.
Government declined 8,000 in August.
Earnings, Revisions, Miscellaneous
Average hourly earnings rose 17 cents to $30.73, the fifth consecutive month of increases, while the average workweek was 34.7 hours for the third consecutive month. Nominal wage increases have not kept pace with inflation this year, resulting in declining real wages.
June nonfarm payroll was revised upward 24,000 to 962,000 and July was revised upward 110,000 to 1,053,000. Combined revisions of the previous two months were 134,000 higher. Adding those revisions to August’s report still yields less than half the expected increase in August.
Prime age (25-54 years old) employment rose 158,000 and the unemployment rate fell to 4.7%, a 0.2 percentage point decline, the same decline as the overall unemployment rate for August.
The labor force participation rate remained 1.6 percentage points lower than February 2020 and 10.4 percentage points higher than the April 2020 low of the recession.
The number of persons not in the labor force who currently want a job plummeted by 835,000 to 5.7 million, which is nearly as low as the February 2020 level of 5.0 million. This falling number is indicative of the broad availability of jobs for those who want them; many of the unemployed are not taking jobs that are available.
August’s jobs report is a disappointment from almost every angle. The labor market has turned anemic in nearly every sector, the result of disincentives to work stemming from government action. While nonfarm employment has risen 17.0 million since April 2020, it is still down 5.3 million from February 2020, with growth now stalling out and 8.4 million still unemployed. The combination of a slowing labor market and persistent inflation is a red flag that the economy is trending towards a period of stagflation.
- States should not use federal funds to extend supplemental weekly unemployment benefits; these payments have incentivized unemployment and their extension will continue having that effect.
- The federal government should remove disincentives to work like increased SNAP benefits, healthcare subsidies, the expanded child tax credit, etc. Instead, the taxpayer dollars used to finance these programs should be used to either reduce the deficit or decrease taxes which will encourage economic growth.