Evelyn Reynolds

The August jobs report came in weaker than expected.
Employment growth by different industries showed a mixed bag for the U.S. economy.
The growth was led by leisure and hospitality and health care and social assistance.

Getty Images

The August jobs report came in weaker than expected, and employment growth by different industries showed a mixed bag for the U.S. economy.
The growth was led by leisure and hospitality and health care and social assistance, with each category adding more than 40,000 jobs, according to data from the Bureau of Labor Statistics.

If private education is included with the health-care group, as some economists do, that category would have grown by 47,000 jobs.
Elsewhere in the report, related categories of jobs saw conflicting data. Construction was a bright spot, growing by 34,000 jobs, but manufacturing shed 24,000 jobs. Professional and business services ticked up by 8,000 jobs, but information lost 7,000.
“The job growth is coming really from only three places right now: leisure and hospitality, health and education services, and government. … We’re just not seeing a lot of growth in business and professional services, and I think that is indicative of an economy that’s slowing down,” former Department of Labor chief economist Betsey Stevenson said on CNBC’s “Squawk Box.”
Even some of the stronger categories showed a slowdown, at least temporarily. The health-care subsector added 31,000 jobs, or about half its average over the prior 12 months, according to the Bureau of Labor Statistics.

Don’t miss these insights from CNBC PRO More

The U.S. economy created slightly fewer jobs than expected in August, reflecting a slowing labor market while also clearing the way for the Federal Reserve to lower interest rates later this month.
Nonfarm payrolls expanded by 142,000 during the month, up from 89,000 in July and below the 161,000 consensus forecast from Dow Jones, according to a report Friday from the Labor Department’s Bureau of Labor Statistics.

At the same time, the unemployment rate ticked down to 4.2%, as expected.
The labor force expanded by 120,000 for the month, helping push the jobless level down by 0.1 percentage point, though the labor force participation rate held at 62.7%. An alternative measure that includes discouraged workers and those holding part-time jobs for economic reasons edged up to 7.9%, its highest reading since October 2021.
The household survey, which is used to calculate the unemployment rate and is often more volatile than the survey of establishments, showed employment growth of 168,000.The balance, though, tilted towards part-time employment, which increased by 527,000, while full-time fell by 438,000.

Markets showed little initial reaction to the data, with stock futures holding negative and Treasury yields also lower.
While the August numbers were close to expectations, the previous two months saw substantial downward revisions. The BLS cut July’s total by 25,000, while June fell to 118,000, a downward revision of 61,000.

“I don’t like this a whole lot. It’s not disaster, but it’s below expectations on the headline, and what really bothers me is the revisions,” said Dan North, senior economist for North America at Allianz Trade. “This is certainly going the wrong way.”
From a sector standpoint, construction led with 34,000 additional jobs. Other substantial gainers included health care, with 31,000, and social assistance, which saw growth of 13,000. Manufacturing lost 24,000 on the month.
On wages, average hourly earnings increased by 0.4% on the month and 3.8% from a year ago, both higher than the respective estimates for 0.3% and 3.7%. Hours worked edged higher to 34.3.

The report comes with markets on edge over the next step for the Fed, which has been on hold with rates since July 2023 after having enacted a series of sharp increases to bring down inflation.
Heading into the release, markets had been pricing in a 100% probability that the Fed will start cutting rates when it meets Sept. 17-18. The only question was how much.
Following the payrolls release, futures market pricing tilted towards a half percentage point cut, according to the CME Group’s FedWatch gauge.
“For the Fed, the decision comes down to deciding which is the bigger risk: reigniting inflation pressures if they cut by 50 [basis points] or threatening recession if they only cut by 25 [basis points],” said Seema Shah, chief global strategist at Principal Asset Management. “On balance, with inflation pressures subdued, there is no reason for the Fed not to err on the side of caution and frontload rate cuts.”
The recent narrative for the economic data has indicated continuing growth but a slowdown for the labor market. Payrolls processing firm ADP reported Thursday that private companies added just 99,000 jobs in August, while outplacement firm Challenger, Gray & Christmas reported that layoffs surged in August and hiring had hit its slowest year-to-date pace going back to at least 2005.
The BLS report indicated that the private sector added 118,000 jobs for the month, up from 74,000 in July. Government jobs increased by 24,000.
Most Fed officials have indicated that they also see rates coming down. In his pivotal annual speech at the Fed’s Jackson Hole, Wyoming conclave, Chair Jerome Powell proclaimed that “the time has come” to adjust policy, though he provided no specifics for what that meant.
In a speech Friday morning, New York Fed President John Williams endorsed rate cuts.
“With the economy now in equipoise and inflation on a path to 2 percent, it is now appropriate to dial down the degree of restrictiveness in the stance of policy by reducing the target range for the federal funds rate,” Williams said in remarks before the Council on Foreign Relations in New York.
This is breaking news. Please check back for updates. More

Wall Street is gearing up for one of the most important economic releases of the year Friday.
The consensus is for the nonfarm payrolls report to show growth of 161,000 for August and a slight decline in the unemployment rate to 4.2%.
Markets are certain the Fed will start lowering interest rates in a couple weeks, with the possibility of a jumbo cut depending on what Friday’s report shows.

Andreypopov | Istock | Getty Images

Wall Street is gearing up for one of the most important economic releases of the year Friday, when the Labor Department puts out a jobs report expected to go a long way in determining the future of Federal Reserve policy.
The Wall Street consensus is for nonfarm payrolls growth of 161,000 for August and a slight decline in the unemployment rate to 4.2%, according to Dow Jones.

However, recent data, including a massive downward revision to previous counts, has pointed to a sharp slowdown in hiring and has put some downside risk to that forecast.
In turn, markets are certain the Fed will start lowering interest rates in a couple weeks, with the possibility of a jumbo cut depending on what Friday’s report shows.
“The labor market has cooled faster than we originally had been told, so that’s what’s calling [Friday’s report] into question,” said Giacomo Santangelo, economist at job search site Monster. “What the Fed is going to do in response, how are they going to adjust rates, that’s why we are having this conversation.”
While job growth has been tailing off through much of 2024, the deceleration hit home for the market with a July report that showed payroll growth of just 114,000. That wasn’t even the lowest number of the year, but it followed a Fed meeting that stirred up sentiment the central bank was being too complacent about a weakening economy and might hold interest rates high for too long.
What has followed has been a series of reports indicating that while the economy is still on its feet, hiring is decelerating, the manufacturing sector is fading further into contraction, and it’s time for the Fed to start cutting before it risks overdoing its inflation fight and dragging the economy into recession.

The latest bad news came Thursday when payrolls processing firm ADP put August private job growth at just 99,000, the smallest gain since January 2021.

Contemplating the Fed’s next move

“If they’re too aggressive for too long a period of time, without easing on monetary policy, this could lead to the giant ‘R’ and we don’t even want to say the word,” Santangelo said, referring to “recession.” “If God forbid this does lead to an economic downturn, all fingers are going to point toward the Fed.”
Markets consequently are expecting the Fed to lower benchmark rates by at least a quarter percentage point when its next meeting concludes Sept. 18, with the possibility rising of a half-point reduction. The Fed hasn’t reduced its benchmark rate by half a point since the emergency cuts during the early Covid days.
Traders are pricing in a succession of cuts that would shave about 2.25 percentage points off the fed funds rate through 2025, futures contracts show. The benchmark overnight borrowing rate is currently targeted in a range between 5.25%-5.5%.
Such an aggressive easing posture would indicate not merely an effort to normalize rates from their 23-year high but also reflect a deeper economic pullback. In the more immediate term, though, the move lower would be targeted more at a labor market still feeling aftershocks from the Covid pandemic.
Monster job search data is still heavily tilted toward health care-related positions, which have flourished in the current era, while the most common search terms are “work from home,” “part time” and “remote,” reflecting the move to a hybrid environment.
Santangelo said there also is still a substantial skills gap in the labor market, despite a sharp narrowing in the gulf between open jobs and available workers, which has contracted to about 1.1 to 1 from 2 to 1 a couple years ago.
“The jobs that are being created are not necessarily suited for the people who are getting laid off. We still have a huge skills gap. The easiest place to see that is health care,” he said. “The No.1 thing that job seekers are looking for is more flexibility. There’s that kind of gap between employers and job seekers also.”

Worries from job seekers

Workers in turn are getting more pessimistic about the state of play in the labor market.
The Zeta Economic Index, which uses artificial intelligence to track various economic metrics, is showing that concerns about jobs are accelerating — even though the broader economy is still performing well.
A measure of job market sentiment fell 1% in August and is down 4.6% from a year ago, Zeta figures show. The gauge’s “new mover index” dropped 9.9% on the month, reflecting worries over job stability.
“Despite a resilient economy … job market concerns persist. The job sentiment dip, paired with the mixed bag of consumer behavior, signals an ongoing caution in the workforce,” said David Steinberg, co-founder and chairman of Zeta Global, which compiles the index. “As the economy shows signs of a ‘soft landing,’ the persistent caution regarding job stability continues to temper broader economic optimism.”
The Zeta data mirrors a recent Conference Board survey, which reflected a sharp narrowing of the gap between respondents saying jobs were easy to find as opposed to hard to get.
Markets also will be watching the wage component of Friday’s report, though that has become less of an issue lately as inflation has moderated.
The consensus is for average hourly earnings to post a 0.3% increase on the month and a 3.7% year-over-year move, both 0.1 percentage point higher than July.

Don’t miss these insights from CNBC PRO More

Layoffs soared in August, hitting their highest total for the month in 15 years, while year-to-date hiring hit the lowest in the 19 years of a Challenger, Gray & Christmas survey.
The report showed the biggest growth in planned layoffs came in the technology field, with companies announcing 41,829 cuts, the most in 20 months.

Alvaro Gonzalez | Moment | Getty Images

Layoffs soared in August, hitting their highest total for the month in 15 years, while year-to-date hiring reached a historic low, outplacement firm Challenger, Gray & Christmas reported Thursday.
Announced job cuts totaled 75,891 for the month, lurching 193% higher than July. Though the total was just 1% higher than the same month in 2023, it was the highest number for August going back to 2009, as the economy was still escaping the worst of the global financial crisis.

On the hiring front, companies said they were adding just 6,101 new workers, up by nearly 2,500 since July, but down more than 21% from August 2023. The year-to-date hiring announcements of nearly 80,000 is the lowest total in history going back to 2005.
“August’s surge in job cuts reflects growing economic uncertainty and shifting market dynamics,” said Andrew Challenger, the firm’s senior vice president. “Companies are facing a variety of pressures, from rising operational costs to concerns about a potential economic slowdown, leading them to make tough decisions about workforce management.”
The report comes with concerns rising that the labor market is weakening even though the U.S. economy has seen growth of 1.4 million in nonfarm payrolls this year. Payrolls processing firm ADP reported Wednesday that private companies added just 99,000 workers in August, the smallest gain since January 2021.
Markets expect a softening jobs picture to prod the Federal Reserve into lowering interest rates later this month even with inflation running higher than the central bank’s 2% target.
To be sure, the Challenger layoffs data is somewhat out of sync with government reports, which show that initial claims for unemployment benefits have been slightly elevated in recent weeks but not reflective of a major escalation. For the week ended Aug. 31, jobless claims totaled 227,000, a slight decrease from the previous period.

Thursday’s report showed the biggest growth in planned layoffs came in the technology field, with companies announcing 41,829 cuts, the most in 20 months.
“The labor market overall is softening,” Challenger said.
Companies announcing job cuts most often cited cost-cutting and economic conditions as the reasons, though artificial intelligence also was listed for the first time since April.

Don’t miss these insights from CNBC PRO More

Companies hired just 99,000 workers last month, less than the downwardly revised 111,000 in July and below the consensus forecast for 140,000, according to payrolls processing firm ADP.
The report corroborates multiple data points recently that show hiring has slowed considerably from its blistering pace following the Covid outbreak in early 2020.
The ADP data showed that while hiring has slowed considerably, only a few sectors reported actual job losses.

Private sector payrolls grew at the weakest pace in more than three-and-a-half years in August, providing yet another sign of a deteriorating labor market, according to ADP.
Companies hired just 99,000 workers for the month, less than the downwardly revised 111,000 in July and below the Dow Jones consensus forecast for 140,000.

August was the weakest month for job growth since January 2021, according to data from the payrolls processing firm.
“The job market’s downward drift brought us to slower-than-normal hiring after two years of outsized growth,” ADP chief economist Nela Richardson said.
The report corroborates multiple data points recently that show hiring has slowed considerably from its blistering pace following the Covid outbreak in early 2020.
Job openings in July also touched their lowest point since January 2021, according to a Labor Department report Wednesday, while outplacement firm Challenger, Gray & Christmas reported Thursday that this was the worst August for layoffs since 2009 and the slowest year for hiring since the firm started tracking the metric in 2005.
Still, the ADP data showed that while hiring has slowed considerably, only a few sectors reported actual job losses. Professional and business services declined 16,000, manufacturing lost 8,000 and information services declined by 4,000.

The latest Labor Department data also helped dispel fears of widespread layoffs, as initial claims for unemployment benefits ticked lower to 227,000 for the week ending Aug. 31, slightly below the consensus forecast for 229,000.
On the upside, education and health services added 29,000, construction increased 27,000 and other services contributed 20,000. Financial activities also saw a gain of 18,000 and trade, transportation and utilities was up 14,000.
By size, companies that employ fewer than 50 workers reported a loss of 9,000, while those with between 50 and 499 increased by 68,000.
Wages continued to rise, but continued to show an easing pace than some of the earlier gains. Annual pay increased 4.8% for those who stayed in their jobs, about the same level as July, according to ADP.
The ADP count now tees up the more closely watched nonfarm payrolls report, which the Bureau of Labor Statistics will release Friday. While the two reports can differ significantly, they were close to perfectly in line for July.
The consensus forecast is for payrolls to have increased by 161,000, after rising by 114,000 in July, with a tick down in the unemployment rate to 4.2%, though the recent data could add some downside risk to the estimate. Private payrolls grew by just 97,000 in July, according to the BLS.
Markets expect the weakening jobs picture to push the Federal Reserve into lowering interest rates when it meets Sept. 17-18. The main question is how quickly and how aggressively the Fed will move, with current market pricing indicating at least a quarter percentage point cut at this month’s meeting and a full percentage point lopped off the federal funds rate by the end of 2024.
ADP reported that it conducted a rebenchmarking of its data based on the Quarterly Census of Employment and Wages, resulting in a decline of 9,000 jobs for the August report. A similar adjustment from the BLS indicated that nonfarm payrolls had been overcounted by 818,000 between April 2023 and March 2024. ADP will do a full-year adjustment in February 2025. More