The labor market is strong, although it is normalizing

Labor market figures continued to reflect a broadly robust outlook during August. Nonfarm payrolls advanced by 187,000 jobs (compared to the expected 170,000) and represented an acceleration from the previous month’s downwardly revised 157,000 job increase. This increase would have been even larger if not for the Hollywood strike. The August increase was once again led by the health care and social assistance sector, adding another 97,000 jobs. Additionally, the leisure and hospitality sector stood out with the creation of 40,000 jobs. In contrast, transportation and warehousing activities accounted for the loss of 34,000 jobs.

Another significant fact was that the participation rate, which is the percentage of the population that is working or actively seeking employment, climbed by two-tenths of a percentage point to 62.8%, reaching a post-pandemic high. This increase in the participation rate was led by the younger segment of the population. To a greater extent, this situation caused the unemployment rate to rise by three-tenths to 3.8% (compared to the expected 3.5%), the highest since February 2022. On the other hand, it was noted that the number of unemployed increased by 514,000 to 6.4 million people.

Meanwhile, average hourly wages rose by just 0.2% in the month, leading to a deceleration in annual growth to 4.3% from 4.4%. Finally, job openings and labor turnover survey (JOLTS) fell in July to 8.83 million (compared to 9.17 million in June), marking the weakest figure since March 2021 and the third consecutive decline.

Having analyzed this labor market data and awaiting the release of August’s inflation data in a week (the consensus estimates that core inflation will reach an annual rate of 4.3% compared to 4.7% in July), the market is beginning to anticipate that the Fed could have arguments to implement a pause in its next monetary policy meeting on September 20. The consensus assigns a 93% probability that the reference rate will remain at its current levels of 5.25% to 5.5%.

Nonfarm payroll (Change during the month, in thousands)

Source:  JP Morgan

Official Unemployment Rate including part-time and discouraged workers (monthly in %)

Source:  JP Morgan