The labor market appears to have shifted into a lower gear, reinforcing concerns that businesses have little appetite to hire as interest rates weigh on investment and the path of consumer demand remains uncertain.
Employers added 142,000 jobs in August on a seasonally adjusted basis, the Bureau of Labor Statistics reported on Friday, a weaker-than-expected showing for the second consecutive month. And totals for June and July were revised downward.
The unemployment rate, however, dropped to 4.2 percent, after rising to 4.3 percent in July.
Here’s what else to know:
Revisions add to the cooler vibe: June and July were revised down by a combined 86,000 jobs, bringing the three-month average to 116,000 jobs. Over the year before last month, employers added an average of 202,000 jobs per month.
Wages came in stronger than expected: Average hourly earnings rose 0.4 percent in August from the previous month, or 3.8 percent from a year earlier, muddying a picture of declining labor demand. The average workweek also ticked up, indicating that workers are getting more hours.
People are still working at high rates: Labor force participation for people in their prime working years, ages of 25 to 54, ticked down slightly in August, to 83.9 percent. The July rate of 84 percent was the highest since 2001.
July’s unemployment rate was a blip: The July jump to 4.3 percent was mostly because of temporary layoffs. That number dropped back to its normal rate in August, bringing the unemployment rate to 4.2 percent along with it.
By another measure, slack is increasing: A broader measure of underemployment that includes people working part time who would rather be working full time ticked up to 7.9 percent in August, the highest level since October 2021.
Sector growth has narrowed even more: The industries adding significant numbers of jobs in August were health care and social assistance, food and drinking establishments, and construction, which has remained surprisingly resilient in the face of high interest rates. Manufacturing has not been so resilient, and shed 24,000 jobs.
What it means for the Fed: The latest report comes at a critical time for Federal Reserve officials. They have shifted their attention from inflation, which has fallen markedly, to the health of the labor market. The Fed chair, Jerome H. Powell, has said he doesn’t want to see opportunities for workers diminish further, and has signaled that the central bank will begin lowering interest rates in mid-September. The question is by how much.
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