![Unemployment rate unexpectedly jumped to 3.8% in August as wages rose by 187,000](https://image.cnbcfm.com/api/v1/image/107294972-16935720671693572063-31005154808-1080pnbcnews.jpg?v=1693572360&w=750&h=422&vtcrop=y)
The unemployment rate rose sharply in August as the summer of 2023 came to an end and the labor market was in slowdown mode.
Nonfarm payrolls rose this month by a seasonally adjusted 187,000, above the Dow Jones estimate of 170,000, the U.S. Bureau of Labor Statistics reported Friday.
However, the unemployment rate stood at 3.8%, significantly higher than in July and the highest since February 2022, and estimates of non-farm labor costs for previous months showed a sharp downward revision. That rise in the unemployment level came as the employment rate rose to 62.8%, the highest since February 2020, just before the declaration of the Covid pandemic. The total labor force grew by 736,000.
A more comprehensive unemployment measure that includes both discouraged workers and those working part-time for economic reasons has risen to 7.1%, up 0.4 percentage points and the highest since May 2022.
The average hourly wage increased by 0.2% this month and by 4.3% compared to a year ago. Both were below the respective forecasts of 0.3% and 4.4%, another possible sign that inflationary pressures are easing. The number of hours worked increased to 34.4.
“The U.S. job market continues to come back down to earth, but from a very high peak,” said Nick Bunker, head of economic research at the Indeed Hiring Lab. “The job market was sprinting last year and is now moving closer to a marathon pace. A slowdown is welcome; it’s the only way to bridge the gap.”
Healthcare showed the largest gains by sector, with an increase of 71,000. Other leaders were leisure and hospitality (40,000), social assistance (26,000) and construction (22,000).
Transportation and storage lost 34,000, likely due to Yellow Trucking’s bankruptcy, and information fell by 15,000.
While growth in nonfarm labor costs continued to defy expectations, previous months’ figures were revised significantly lower.
The estimate for July fell by 30,000 to 157,000. June was revised down by 80,000 to 105,000, making it the smallest monthly gain since December 2020.
“The broad message here seems to be that we are approaching full employment, with supply and demand becoming more balanced,” Bank of America economist Stephen Juneau said in a client note. “Profits are concentrated in the lagging sectors. The rest of the labor market is likely to be at full employment.”
The unexpected rise in the number of unemployed came as the number of unemployed grew by 514,000. The number of working households rose by 222,000. Most of the jobs came from the private sector, while the government contributed only 8,000.
The Hollywood writers’ strike and Yellow Trucking’s bankruptcy likely cut payrolls by 50,000, according to Goldman Sachs.
![Econ data now points very consistently to a soft landing, Goldman's Hatzius says](https://image.cnbcfm.com/api/v1/image/107295070-16935806881693580684-31006661194-1080pnbcnews.jpg?v=1693583603&w=750&h=422&vtcrop=y)
When it comes to the closely watched job count, August is often one of the most volatile months of the year and can be subject to sharp revisions later on. While the initial estimate and final counts changed little in 2022, the 2021 figure more than doubled at the final count.
August’s job data comes at a crucial time as Federal Reserve officials look to chart a forward course for monetary policy.
Markets generally expect the Fed to skip a rate hike at its September 19-20 meeting. However, market prices still point to about a 38% probability of a final rate hike between October 31 and November. 1 meeting, according to CME Group data.
“This report is more or less in line with the Fed’s expectations,” said Dan Greenhaus, chief economist and strategist at Solus Alternative Asset Management. “The labor market continues to slow and ease, even as a result of the strike activity, and I don’t think this report changes the Fed’s narrative.”
Goldman Sachs said the payroll numbers help confirm the company’s forecast that the Fed is done raising rates during this cycle. Through a series of eleven hikes, the central bank has cut its key interest rate from near zero to a target range of 5.25%-5.5%.
Recent data paints a mixed picture of where the economy is heading: overall growth remains steady as consumers continue to spend, but the labor market is beginning to detach from historically tight conditions.
For example, the number of job vacancies fell to 8.83 million in July. That’s still well above pre-Covid pandemic levels, but it’s the lowest level since March 2021. That amounted to 1.5 job openings for every worker considered unemployed by the BLS.
At the same time, inflation is showing signs of cooling, even if it remains well above the level that Fed policymakers feel comfortable with.
The Commerce Department reported earlier this week that prices of personal consumer spending, the Fed’s favorite inflation gauge, rose just 0.2% in July. That amounted to a 12-month gain of 3.3%, or 4.2% excluding food and energy – the “core” level that the Fed says is a better measure of longer-term inflation.
Consumer spending was strong this month, rising 0.6% when adjusted for inflation, even as real disposable personal income fell 0.2%. Households have used credit cards and savings to compensate as the personal savings rate fell to 3.5% in July, a sharp drop from 4.3% in June.
The ministry also reported that gross domestic product grew at an annualized rate of 2.1% in the second quarter, a level still above what the Fed considers trend growth for the US economy but below its initial estimate of 2 .4%.
However, the Atlanta Fed tracks third-quarter GDP growth at a robust 5.6%. That goes against long-standing expectations that the economy is likely to slide into at least a superficial recession after a series of aggressive rate hikes by the Fed.