Labor Market Slowing Considerably

The labor market is slowing considerably. 187,000 jobs were added in August, well below the 271,000 average gain in the past 12 months. Employment in the prior two months was revised down a sharp 110,000.

The unemployment rate rose by 0.3% to 3.8%, the highest since February 2022, with employment in the household survey up 222,000 and the labor force jumping nearly three quarters of a million; the labor force participation rate rose 0.2% to 62.8%, the highest since the pandemic.

Average hourly earnings rose 0.2% in August, missing consensus expectations for a 0.3% increase, and were 4.3% higher from a year earlier. The average workweek edged up by 0.1 hour to 34.4 hours. 

Job openings fell sharply in July to a 28-month low of 8.827 million vacancies from 9.165 million in June, which was revised down sharply from the prior estimate of 9.582 million. Employers have substantially scaled back hiring plans, reducing job postings by around 800,000 in the past two months.

The job openings-to-unemployed ratio fell from an all-time high of 2.0 in March 2022 to 1.50 in July, but is still well above its pre-pandemic average. The “quits rate”—a proxy for employees’ job mobility and labor market strength—edged down to 2.3% and matched the pre-pandemic rate, offering further evidence of a slowing labor market. On a positive note, the layoffs and discharges rate held steady at 1.0% for the fourth consecutive month, pointing to employers’ continued reluctance to reduce headcount. 

The Conference Board’s Consumer Confidence Index plunged to 106.1 in August from a downwardly-revised 114.0 in July, well short of consensus expectations of 116. The Present Situation Index and the Expectations Index, which constitute the overall confidence index, fell sharply in large part due to consumers’ less optimistic assessments of current and future labor market conditions.

The percentage of consumers who judged jobs were “plentiful” fell notably in August, possibly portending another large drop in vacancies when August’s job openings data are released in early October.