United States: Hiring Picks Up, but So Does the Unemployment Rate

Based on the establishment survey's August data, the US labour market situation seems to be improving (table 1). The 187,000 jobs added is the strongest report since May. However, June and July's prints were revised down by a combined 110,000, and this is now the third consecutive month that a substantial number of jobs has been knocked off the initial estimate.

That said, sector data shows that the labour market remains strong. In August, 63.8% of the 250 sectors surveyed reported an increase in their workforce. This is the highest level since January. Employment continued to trend up in construction, manufacturing, and private education and health services. In contrast, employment in temporary help services fell by 18,900—its seventh successive monthly decline—indicating some weakness in the labour market. Information employment also faltered and was down 15,000. The biggest source of jobs lost was the transportation and warehousing sector (-34,200), but this was primarily due to the end of operations at Yellow Corp.

At first glance, job creation according to the establishment survey appears to have improved compared to last month. However, the same cannot be said for the unemployment rate (table 2). The 0.3 percentage point gain equals May's print. However, aside from the first wave of the pandemic, the last time unemployment surged this strongly was in November 2010. At 3.8%, unemployment is also at its highest since February 2022. That said, this increase can be attributed to a spike in the labour force rather than job losses. Unemployment is rising because new entrants to the labour market aren't finding work as quickly. If this trend continues, it could help reduce pressure on the market and support slower wage growth and inflation.

August's labour market data are anything but poor. However, they provide a mixed picture that should keep the Federal Reserve on the sidelines at its upcoming monetary policy meetings.