The August 2023 jobs report issued Friday by the U.S. Bureau of Labor Statistics suggests a cooling but still-strong job market, economists said.
Other federal data on quits and job openings, for example, support the notion of a Goldilocks labor market.
Jobseekers still need to be on their best game when applying for roles, economists said.
Mario Tama | Getty Images
1. Job growth is slowing
The U.S. economy added 187,000 jobs in August, the Labor Department said Friday.
Job growth is clearly losing momentum: The three-month average in August was 150,000 jobs added, versus 201,000 in June, for example, Bunker said.
But August’s reading was “exactly in line” with the 2015-2019 average of 190,000 a month, said Julia Pollak, chief economist at ZipRecruiter. And job gains in August were broad-based across industries, she said.
Lat month’s tally was also reduced by tens of thousands due to one-off factors like ongoing strikes in Hollywood and trucking-sector layoffs largely driven by the bankruptcy of Yellow Corp., said Aaron Terrazas, chief economist at career site Glassdoor.
Further, monthly job growth still exceeds U.S. population growth, economists said. Estimates on this “neutral” pace vary. Bunker pegs it around 70,000 to 100,000 jobs a month; Terrazas puts it around 150,000.
2. Unemployment is up — but not for bad reasons
The unemployment rate jumped to 3.8% in August from 3.5% in July, the U.S. Labor Department said Friday.
However, that relatively big increase doesn’t seem to be for bad reasons like people losing jobs, economists said. In fact, employment rose in August.
Instead, the jump is largely attributable to an increase in the number of people looking for work, economists said. More people are therefore entering the labor force — which gives the appearance of rising unemployment.
“Although the unemployment rate jumped to an 18-month high of 3.8% … that arguably isn’t quite as alarming as it looks since it was driven by a 736,000 surge in the labour force,” Andrew Hunter, deputy chief U.S. economist at Capital Economics, wrote in a research note Friday.
The rate of labor force participation in August reached its highest level since the start of the Covid-19 pandemic, according to Labor Department data.
That said, it would become worrisome if new entrants to the labor market don’t find jobs quickly and unemployment continues to rise, Pollak said.
Historically, an unemployment rate below 4% is “still consistent with improving labor market conditions for job seekers and workers, even those who have traditionally faced barriers to employment,” Pollak said.
3. The great resignation is over
The pandemic-era trend known as the great resignation is over.
Workers quit their jobs at a historically high rate in 2021 and 2022, attracted by ample job opportunity and higher pay elsewhere. Quits are a proxy of workers’ willingness or ability to leave jobs. Now, quits — as well as the number of new hires made by employers — have fallen back to their pre-pandemic levels.
It’s “exactly where you’d want” these rates to be, Zandi said.
That said, some sectors have seen the quits rate decline noticeably below pre-pandemic levels, suggesting workers feel less confident about their job prospects nowadays.
It’s a numbers game. Apply early and often. Speed really, really, really matters.
Julia Pollak
Chief economist at ZipRecruiter
For example, the quits rate for the leisure and hospitality as well as accommodation and food services sectors are each at 3.9%, “lower than 2019 levels of 4.6% and 4.9%, respectively,” Andrew Patterson, senior economist at Vanguard, wrote in an email.
4. Job openings ‘rapidly’ approaching normal
Job openings — a barometer of employer demand for workers — remain historically high but have been trending downward.
There were about 8.8 million openings in July, the fewest since March 2021, according to Labor Department data. That’s more than at any point before the pandemic, though down from the Covid-era peak around 12 million in March 2022.
Job openings are “rapidly approaching” their pre-pandemic peak, suggesting “labour market conditions have mostly normalized,” Hunter wrote in a note this week.
5. Wage growth is slowing, but outpaces cost of living
Wage growth has cooled from a pace unseen in decades.
Average three-month growth was 4.5% in August, on an annualized basis, according to a White House Council of Economic Advisers analysis of earnings data in Friday’s jobs report. While still elevated, that’s down from 4.9% last month and a peak of 6.4% in January 2022, CEA said.
There’s good news for workers, though: “Real” wages have finally flipped positive after a long stretch of declines for the average worker.
Real wages are net earnings after accounting for increases in the cost of living. On average, inflation had outstripped the growth in average hourly wages for two years, from April 2021 to April 2023, according to Labor Department data. That meant the average worker saw their living standard erode.
But a combination of falling inflation and relatively strong wage growth has meant a reversal of that trend since May — meaning living standards have begun rising again.
In July, real average hourly earnings rose 1.1% from a year earlier, following increases of 1.3% and 0.2% in June and May, respectively, according to the Labor Department.
6. Jobseekers need to be ‘on their best game’
While the labor market remains strong, jobseekers “need to be on their best game” since they no longer have “unprecedented” leverage when seeking work, Pollak said.
Workers face more competition for open roles, she said. There are opportunities but they’ll be a bit harder to find, she added.
“It’s a numbers game,” Pollak said. “Apply early and often. Speed really, really, really matters.” More
