BLS Jobs Report – Weak Across the Board
The August Jobs Report came in far softer than expected. The BLS showed just 22,000 jobs created, well below estimates of 75,000. Prior months were also revised down by a net 21,000, with June now showing a negative number – breaking a 54-month streak of job gains.
A big factor was the Birth/Death model, which added 90,000 jobs. Without it, headline job growth likely would have been negative. Healthcare and Social Assistance made up nearly all the gains, with 47,000 jobs added – an area that had looked weaker in the ADP report.
The Household Survey told a different story, showing 288,000 job gains, but it remains volatile after reporting 863,000 job losses over the prior three months. Importantly, the unemployment rate ticked higher from 4.2% to 4.3%, in line with expectations. However, the quality of jobs was concerning – 357,000 full-time jobs lost offset by 597,000 part-time jobs gained.
Signs of strain are building. The average length of unemployment rose to 24.5 weeks, the highest since April 2022. Part-time workers unable to find full-time positions climbed to 1.3M, near Covid-era highs. The broader U-6 unemployment rate moved up to 8.1%, the highest in almost four years.
The JOLTS report earlier this week also pointed to weakness, with job openings per unemployed worker dropping below 1 for the first time since 2018 (ex-Covid). Even with some overcounting in openings, the takeaway is clear: there are now more unemployed people than available jobs.
On the wage side, Average Hourly Earnings rose 0.3%, right in line with expectations, but year-over-year growth cooled from 3.9% to 3.7%. The average workweek held steady at 34.2 hours. Together, this brought weekly earnings growth down to 3.4% year over year.
What this means for rates: With a soft labor market and cooling wage pressures, the Fed is under pressure to act. Markets are now pricing in a 100% chance of a 25bp cut in September, followed by high odds of additional cuts in October and December. We’ve been calling for three cuts this year, and the data is increasingly lining up with that outlook.