The Jobs Report – August 2022

Highlight

The August employment report showed the economy added 315K jobs, ahead of the consensus estimate of 298k. July’s robust 528k result was slightly revised down by 2k to 526k, and June’s number was revised down by 105k. We believe that August’s report confirms the labor market remains in good shape.

What you need to know:

• With the revisions, the 3-month average declined to 378k jobs gained down from 402k. This reverses last month’s 3-month rolling increase but still shows healthy employment levels.
• In a reversal from recent months, the unemployment rate rose to 3.7% from 3.5%. The unemployment rate is calculated from the household survey which showed a meaningful increase in the civilian labor force of 798k in August. The larger number of participants led to a 344k increase in unemployed persons.
• As with prior months, job gains were widespread through various sectors, with professional and business services (68k), manufacturing (45k), and retail trade (44k) leading the way.
• Average hourly earnings remained elevated by historical standards at 5.2%, equaling last month’s figure. However, with inflation still running above that number, workers continue to lose purchasing power in real terms. Another piece of good news associated with an increased workforce; the participation rate increased from 62.1% to 62.4%. While still about 1% below pre-pandemic levels, the increase is good news for companies complaining about labor shortages.
• Markets have been keenly focused on the Federal Reserve and its coming policy decisions. This report, although not perfect, will likely not keep them from raising rates at their September 21st meeting. Markets are discounting a 75 bp hike, which we believe the labor market appears strong enough to handle.