August Jobs Report – Job Growth Returns, July Revised Higher

• August nonfarm payrolls rose 162k, easily beating the 55k expected and a nice rebound from the 21k gain in July (revised from an initial -23k loss).  Private sector jobs rose 127k vs. 71k in July.  Two-month revisions added 55k jobs from previous estimates which is a departure from the usual negative revision to jobs.

 

• Job gains were in areas we’ve seen before, namely healthcare at +28k, construction added 22k (think data center construction here). Leisure and hospitality rebounded with 62k new jobs after two months of losses which were likely associated with the concluded World Cup tournament.  Categories losing jobs were information services off -23k and financial activities losing -11k. Government jobs increased 35k offsetting the -50k losses last month associated with seasonal misses around summer teaching calendars.  As we expected after last month’s negative print, the short-term impact of World Cup terminations and education losses were reversed in August which helped flip overall totals back to solid gains.  

 

• The Household Survey, as opposed to the Establishment survey which produces the headline job growth number, generates the unemployment rate, labor force participation rate, etc. For August, it was a rebound with the labor force, (those employed and those not working but actively looking for employment) increasing by 683k after two months of losses. The survey also reported a 115 thousand increase in unemployed persons as some of those new entrants to the labor force were still looking for work. So, after two months of rather weak results in the Household Survey, it rebounded in August with better results.

 

• The increased labor force and modest increase in unemployed led to an unchanged unemployment rate at 4.1% (4.14% unrounded vs. 4.09% in July). That remains the lowest since January 2025, but for the most part, the decline has been less about unemployed totals dropping compared to people dropping out of the labor force. The number of unemployed has decreased by only 349k over the last year, while the labor force has shrunk by 973k. For August at least, the increased labor force led to the Labor Force Participation Rate increasing from 61.4% to 61.6%. A year ago, it was 62.3%, so still some slippage in participation in the last year.

 

• Meanwhile, Average Hourly Earnings rose 0.3% MoM,  matching expectations, but better than the modest 0.1% July gain.  The year-over-year pace, however, decreased a tenth to 3.1%, which matched expectations.  Average weekly hours, however, increased a tenth to 34.4 hours, a tenth better than expected. Still, with annual wage gains in the low 3% level and PCE inflation at 3.7%, real incomes are negative. As we mentioned last month, in that environment maintaining consumption gains will be a challenge.  

 

• Bottom line: with the rebound in August job gains, upward revisions to prior months, a stable unemployment rate, and the rebound in monthly wage gains, the Fed can head into the September FOMC meeting touting a stable labor market.  That will free them to focus on the price stability/inflation mandate.  Thus, next Friday’s August CPI release becomes the key report as to whether they hike or stand pat. After this report the odds of a hike in September have increased from just over 50% to 58% following this report.

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August Job Gains Rebound While Loss in July Revised to Small Gain

Source: BLS

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After Months of Declines, the Labor Force Participation Rate Increased in August

Source: BLS

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TIPS Inflation Breakeven Rates Turned Higher in August Contributing to Higher Market YieldsSource: Bloomberg