U.S. Job Growth Exceeds Expectations in August
The U.S. labor market added jobs at a faster pace than expected in August, but the unemployment rate jumped.
To cool down the economy, the Federal Reserve has imposed 11 rate hikes since March 2022, taking the target range for the federal funds rate up to 5.25% to 5.5% as of August 2023. That took benchmark borrowing costs to the highest level in over 22 years. Those rate hikes have helped to slow inflation, but the pace of hiring is continuing to put upward pressure on wages. While the labor market outlook is uncertain, job growth remains resilient, and the unemployment rate remains low by historical standards.
Employers added roughly 187,000 employees to payrolls in August 2023, according to the Bureau of Labor Statistics (BLS). While that marked the third consecutive month of sub-200,000 job gains – the slowest pace since December 2000 – the nation’s recent job additions came in ahead of economists' projections (+170,000 jobs) and above July’s gain of 157,000 jobs.
Of note: The job counts for June and July were revised considerably lower. Downward revisions to June 2023 data showed 80,000 fewer jobs were added than previously reported, down to 105,000 positions. The July 2023 growth number was also revised down, decreasing by 30,000 jobs to a total of 157,000 positions. With these revisions, employment gains in June and July combined were 110,000 jobs lower than previously reported.
While recent job gains were about half the monthly average of around 399,000 jobs added in 2022, employers are still hiring about the same number of workers than they did prior to the pandemic. From 2015 to 2019, the U.S. economy added an average of roughly 190,000 jobs each month.
On an annual basis, the nation gained nearly 3.1 million jobs in August 2023. Although that was the weakest annual gain since March 2021, it was well above the average of around 2.4 million jobs added annually from 2015 to 2019.
The U.S. economy has recovered all the net jobs lost during the COVID-19 pandemic. As of August, the nation had roughly 4 million more jobs (+2.7%) compared to the pre-pandemic employment level from February 2020.
Jobs by Industry
Job growth in August was seen across most major industry sectors, but most notably in the Education and Health Services sector (+102,000 jobs). Solid gains were also recorded in Leisure and Hospitality Services (+40,000 jobs), Construction (+22,000 jobs), Professional and Business Services (+19,000 jobs), Manufacturing (+16,000 jobs) and Other Services (+13,000 jobs). The only three industries to record job losses in August were Trade, Transportation and Utilities (-20,000 jobs), Information (-15,000 jobs) and Mining and Logging (-2,000 jobs).
Most major industries have recovered all the jobs lost during the COVID-19 pandemic downturn. Professional and Business Services has seen the best recovery, with today’s job count coming in nearly 1.6 million positions ahead of February 2020 numbers. Also well ahead of pre-pandemic norms are Trade, Transportation and Utilities (+1.1 million jobs) and Education and Health Services (+944,000 jobs).
Alternatively, some of the harder-hit sectors remain below pre-pandemic job counts. Despite recent gains, employment in the Leisure and Hospitality Services sector is still well below pre-pandemic employment counts, by roughly 290,000 workers. The Government sector is about 213,000 jobs behind February 2020 levels. Other industry sectors yet to recover all the jobs lost during the COVID-19 downturn include Other Services (-58,000 jobs) and Mining and Logging (-44,000 jobs).
The unemployment rate (U3 or headline unemployment rate which is seasonally adjusted) jumped significantly in August, clocking in at 3.8%, up from the 3.5% rate in July. Still, that was the 19th consecutive month that the unemployment rate remained below 4%.
Since February 2022, the unemployment rate has been in a narrow range of 3.4% to 3.8%. At the onset of the pandemic, the unemployment rate climbed to 14.7% in April 2020. Prior to the pandemic, the unemployment rate clocked in at 3.5% to 5.7% from 2015 to 2019, averaging 4.4% during that period.
The total number of unemployed in the U.S. rose by 514,000, from about 5.8 million in July to roughly 6.4 million in August.
The unemployment rate for adult men increased 40 basis points (bps) from July to August, rising to 3.7%. The unemployment rate for adult women rose 10 bps to 3.2%. Meanwhile, the unemployment rate for teenagers climbed 90 bps from 11.3% in July to 12.2% in August.
Average Hourly Earnings
Average hourly earnings among employees on private nonfarm payrolls rose $0.08 (+0.2%) from July to August. That monthly increase took average hourly earnings to $33.82 in August. On an annual basis, average hourly earnings were up $1.39, a 4.3% increase year-over-year. Overall wage growth is now surpassing rising prices, as the Consumer Price Index (CPI) rose 3.2% in the year-ending July. The Fed’s target for inflation is currently at 2%.
Wage growth over the past year varied by industry. The largest increases in earnings from August 2022 to August 2023 were recorded among workers in Financial Activities (5.6%), Construction (5.2%), Manufacturing (5%), Leisure and Hospitality Services (5%), Trade, Transportation and Utilities (4.9%) and Mining and Logging (4.5%). The smallest increases were among employees in Information (1.8%), Education and Health Services (3.1%), Other Services (3.6%) and Professional and Business Services (4.2%).