A Solid August Jobs Report Shows the Labor Market in a Sweet Spot
A Solid August Jobs Report Shows the Labor Market in a Sweet Spot
The big picture. According to today’s Jobs Report, the labor market overall is continuing to soar at an ideal cruising altitude—high enough to keep the unemployment rate below 4% while creating more opportunities for workers to come in off the sidelines, but low enough so as not to cause a resurgence of inflation.
The key numbers. The economy added 187K jobs in August, exactly in line with the 2015-2019 average of 190K, and job gains were broad-based across industries. The largest gain was in healthcare (+71K), the sector expected to add the most jobs over the next decade. The overall labor force participation rate rose to 62.8%, and the prime-age employment-to-population ratio held steady at 80.9%—the highest rate in 22 years.
The uneven post-pandemic recovery. Industries that still have a headcount shortfalls relative to pre-pandemic levels continued their slow recovery, with leisure and hospitality, nursing homes, and childcare centers posting robust gains. Local government education was a weak point, however, despite early and aggressive back-to-school recruiting campaigns across school districts. The decline suggests that our K-12 schools are yet again starting the school year with many unfilled vacancies.
The ongoing normalization. Average weekly working hours remained in the normal range, edging up to 34.4 hours, even as temporary help services employment declined by 19K. The category has seen payrolls decline by 242K since their peak in March 2022. Declines this large usually indicate a looming downturn, but this time may be different since the decline is from an abnormal height, and since the current level still exceeds the February, 2020, level. Now that more U.S. companies have staffed up internally, they no longer need to rely on external agency staff.
The gradual wage growth moderation. Wage growth moderated to 4.3% YoY from 4.4%. Zooming in over more recent periods, wage growth appears to have slowed even more. The average hourly wage grew at a 3.9% annualized rate over the past three months for production and nonsupervisory employees, and at a 2.8% rate in just the past month, consistent with ZipRecruiter data on the recent decline in average pay posted in online job ads. For now, YoY wage growth is high enough that workers have experienced real wage growth and expanding purchasing power over the year.
Yellow Freight’s closure and the Hollywood strike. A 36.7K drop in truck transportation employment largely reflects the recent closure of Yellow Freight, a trucking company with about 30K staff. But it also reflects the broader freight recession. Employment in truck transportation is still 48K higher than in February, 2020. It may need to fall even further to right-size the industry for current levels of activity, now that spending has shifted back to services from goods and freight costs have slumped. A 16.8K drop in employment in the film industry (aka, motion picture and sound recording industries) is an expected outcome of the Hollywood writers’ strike, which continues to drag on with no end in sight yet. Without those two events, job gains would likely have topped 200K.
