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United States Unemployment August 2023

United States: Labor market continues to gradually slow midway through Q3

Total non-farm payrolls grew by 187,000 in August, up from July’s figure and overshooting market expectations. That said, a notable downward revision to data for June and July—to the tune of 110,000 jobs—took the shine off the August data. Job gains were seen in health care, leisure and hospitality, social assistance, and construction.

The unemployment rate was 3.8% in August, up from 3.5% in July, while nominal wage growth dipped to 4.2% year on year.

Taken together, the latest data suggests that the labor market continues to gradually cool: job gains have ebbed from an average of over 300k in Q1 to around 200k in Q2 and 172k in July–August, with the latter below the pre-pandemic rate. Moreover, the unemployment rate is now 0.4 percentage points above its post-pandemic low.

Looking forward, our panelists see the labor market continuing to soften slightly as H2 progresses, with the unemployment rate forecast to average at 4% in Q4.

On the monetary policy implications of the latest data, Nomura analysts said:

“This report appears consistent with easing labor market pressure and should support the case for the FOMC to keep rates on hold through year-end. Headline job gains surprised modestly on the upside (despite temporary drags), however, persistent downward revisions point to an ongoing downtrend in employment growth. Meanwhile, wage growth continues to cool and rising labor participation is leading to some additional slack in the unemployment rate. Some slowdown in the pace of hiring also confirms the signs of easing labor demand.”

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