The Employment Situation for August 2024

Editor's Note: This report is based on survey data from July 2024 that was published in August 2024. This is the most recent data available. (Source: Bureau of Labor Statistics)

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The US unemployment rate has been climbing for four straight months now with the most recent jump rising by two-tenths of a percentage point, which is double the one-tenth increases we’ve seen in each of the previous 3 months.

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Meanwhile, US employers added 114 thousand jobs, which was well below the 175 thousand net jobs that were expected and more closely resembles the average monthly job growth anticipated each month over the next year than the more than 200 thousand jobs averaged each month over the last year, indicating we may have crossed the tipping point.

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Interestingly, temporary layoffs increased by just under a quarter million, which was more than a 30% increase month over month, and the number of people employed part time because of economic reasons rose by almost 350 thousand, revealing both a softening economy and employers’ hopes that the issues necessitating the staffing reduction are temporary, as well.

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The number of people who are not currently working but who want a job also increased by a little more than 350 thousand to reach about 5.6 million last month.

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The 114 thousand net new jobs added to US payrolls last month were fairly concentrated among a small set of industries. In fact, the healthcare industry alone claimed nearly half of those new jobs, with 55 thousand people joining the ranks of employed health care workers over the course of July - down slightly from the 63 thousand monthly jobs US healthcare employers added on average over the last 12 months.

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The construction industry added about 25 thousand jobs last month, which is more than 30% above the average construction job monthly gains over the last year, while the transportation and warehousing industries netted about 14 thousand jobs, and social assistance jobs rose by a total of about 9 thousand - a figure that is down by about 60% from its average over the trailing 12 months. 

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The information industry saw a loss of about 20 thousand jobs over the course of July, which is likely to get worse next month with another 15 thousand job cuts expected from Intel alone in September, but the remaining surveyed industries were essentially unchanged through the month, with payroll figures in the natural resource extraction and processing industries, manufacturing, wholesale, retail, financial activities, professional services, and leisure and hospitality industries all seeing no meaningful month-to-month change. 

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Average hourly earnings rose to cross the $35 per hour threshold in July, increasing by 8 cents (0.2%) up to $35.07 per hour, while the average workweek dropped by one-tenth of an hour down to 34.2 hours per week.

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Mployer’s Take

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We discussed last month how economists were fairly split in their interpretation of the report released in July as to whether or not the softening of the job market and economic slowdown were reaching an ideal inflation-dampening balance or whether the data indicated that we were approaching a potentially more problematic downturn. 

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This latest report clearly bolsters the argument of the latter group with job additions coming in more than 30% below the (even weakening) expectations, but the longer-term implications remain far from cut and dried.

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The unemployment rate also crossed a worrisome threshold last month, with the 3-month average unemployment rate now exceeding a half point increase over the low unemployment rate within the last year, which is a metric that is often pointed to as a sign that the economy is in recession, although the nature of the pandemic rebound and atypically low unemployment over the last year make this measure somewhat less persuasive than it often has been in the past.

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While wages continue to grow, they are doing so at a much slower rate, rising by about 3.6% over the last year, which slightly outpaces the 3.0% inflation recorded over approximately the same time frame.

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The economic slowdown that the Federal Reserve has been targeting through their extended interest rate hiking campaign seems to have materialized to a critical mass, but the question now shifts to whether we’ve pumped the brakes just enough to reduce speed or hard enough to lock up the brakes and cause an economic skid. 

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It still remains to be seen whether Fed leadership will ultimately implement the first of the long-awaited base interest rate cuts that should reduce some of the job market and economic cooling influence those higher rates have had over the last couple of years, but the significant increase in temporary layoffs seems to indicate that a substantial amount of employers believe that interest rate relief may come in time to keep those jobs from turning into longer term and/or permanent layoffs. 

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While the markets clearly didn’t react favorably to the report, the odds of an interest rate cut when the Fed convenes in September now seem to be close to a 2 to 1 favorite in favor of the interest rate cut at the moment, and if the employment situation report in early September continues in line with the trends that we’ve seen over the last few months, the likelihood of a rate cut in September will climb even higher.

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Check out the Mployer blog here.