Uncertainty over the U.S. economy's health is rippling through markets, adding fuel to an already volatile period that has investors grappling with a shift in Federal Reserve policy, a tight U.S. election, and worries over stretched valuations.
The latest monthly report on the U.S. jobs market had been eagerly anticipated as a key gut check on the health of the economy. Unfortunately, it delivered a mixed picture that doesn't offer clear conclusions about where things stand.
Overall, the data out on Friday suggests that hiring has slowed from earlier this year, but not as sharply as some had feared a month ago.
It's a somewhat cloudy combination that policymakers at the Federal Reserve will need to sort through as they decide how aggressively to cut interest rates later this month.
Here are four takeaways from the jobs numbers for August.
The job market looks stronger in August than the month before
U.S. employers added 142,000 jobs in August — a marked increase from the 89,000 jobs created in the previous month.
Meanwhile, the unemployment rate dipped to 4.2%. That was a relief after the rate had unexpectedly jumped to 4.3% in July, sparking fears about the labor market — and the broader economy.
Much of the increase in July's unemployment rate was the result of temporary layoffs, and many of those people went back to work in August.
Hiring last month was concentrated in hospitality (34,000 jobs), health care (31,000 jobs), and construction (34,000 jobs), while factories and retailers cut jobs.
But the job market looks weaker in August than earlier this year
While employers added more jobs in August than they did in July, the overall pace of hiring has been slowing down.
Last month's job gains were about 30% below the average of the previous twelve months. What's more, job gains for June and July were revised down by a total of 86,000 jobs.
That's consistent with other reports, including one showing fewer job openings by employers in July. And while the unemployment rate dipped in August, it's still up half a percentage point from the beginning of the year.
Stock markets dropped as investors took the glass half-empty stance, especially after employers created fewer jobs than economists had expected in August.
Wages are rising faster than prices
A slowing labor market compared to earlier this year may not be encouraging news for job seekers, but for people currently employed, there was good news: Average wages in August were up 3.8% from a year ago.
Wage gains have been outpacing inflation for over a year now, and that trend likely continued last month. (August inflation figures will be released next week.)
That means workers' real buying power is increasing, helping to offset the big price hikes of previous years.
No clear signal for the Federal Reserve
Unfortunately for policymakers, Friday's mixed labor report doesn't provide clear signals for how to proceed.
The Fed has clearly indicated it plans to cut interest rates when policymakers gather on Sept. 17-18, and the central bank has been keeping a close eye on the job market as it weighs how much to actually cut them.
But Friday's report doesn't provide too much clarity. The dip in the unemployment rate suggests that the central bank can move slowly, trimming interest rates by a modest 0.25 percentage points.
But the downward revision in job growth in June and July might suggest more aggressive action — perhaps a half-point rate cut.
That's the challenge with being "data dependent," as Fed policymakers like to describe themselves. Sometimes the data point in different directions.
The new August jobs report shows employment numbers of U.S.-born workers and foreign-born workers going on two very different trajectories.
Data released by the Bureau of Labor Statistics, an arm of the Department of Labor, shows native-born Americans lost more than 1.3 million jobs over the last 12 months, while foreign-born workers gained more than 1.2 million jobs.
The news comes as U.S. job growth picked up in August but missed economists' expectations, while the unemployment rate changed little.
Data released by the Department of Labor shows native-born Americans lost more than 1.3 million jobs over the last 12 months. (Robert Gauthier/Los Angeles Times / Getty Images)
As of August of this year, there are 129,712,000 native-born workers compared to 131,031,000 in August 2023, meaning a plummeting reduction of 1,319,000 jobs.
In comparison, there were 31,636,000 foreign-born workers in the U.S. as of last month, compared to 30,396,000 in August 2023, a surge of 1,240,000 jobs.
The figures do not differentiate between foreign-born workers who entered the country with authorization, i.e. Green Card holders and those with working visas, and those who entered without prior authorization.
The U.S. has witnessed a surge of immigrants under the Biden-Harris administration, with figures from the Congressional Budget Office (CBO) showing a net gain of more than 9 million immigrants since the end of 2020.
The number of jobs added in June and July were both revised downward. (Jeff Kowalsky/Bloomberg via Getty Images / Getty Images)
About 2.6 million of those immigrants are lawful "permanent residents," which includes green card holders and other immigrants who came through legal channels such as family or employment-based visas. The remaining 6.5 million foreign nationals, referred to as "other foreign nationals," are made up of those who crossed the southern border without prior authorization.
The U.S. Department of Labor on Friday reported that employers added 142,000 jobs in August, compared to the 160,000 gain that was projected by LSEG economists.
The unemployment rate also dipped slightly to 4.2%, in line with expectations, after it had unexpectedly risen to 4.3% in July, which was the highest level for the jobless rate since October 2021.
The U.S. Department of Labor on Friday reported that employers added 142,000 jobs in August, compared to the 160,000 gain that was projected by LSEG economists. (Jordan Vonderhaar/Bloomberg via Getty Images / Getty Images)
The number of jobs added in the prior two months was revised downward, with job creation in June revised down by 61,000 from a gain of 179,000 to 118,000, while July was revised down by 25,000 from 114,000 to 89,000. With the revision, July's job creation was the lowest nonfarm payroll reading since December 2020.
The construction sector saw employment rise by 34,000 in August — above the average monthly gain of 19,000 over the last 12 months. Healthcare employment increased by 31,000 jobs, below the 12-month average of 60,000.
Multiple jobholders increased by 65,000 to 8,538,000, and the number of part-time workers increased by 527,000, while full-time workers decreased by 438,000.