US labor market barely recovers in August

The data ...

In August, job growth in the US amounted to 142 thousand, which was slightly less than expected (consensus 165 thousand, Commerzbank forecast 150 thousand). In addition, the figures for June and July were revised downwards by a total of 86 thousand. The unemployment rate fell from 4.3% to 4.2% after four consecutive monthly increases. Average hourly earnings increased quite strongly by 0.4% from July and by 3.8% from August 2023.

... and our analysis

After the disappointing employment report for July, the big question was to what extent special effects had played a role. We suspected that Hurricane Beryl had dampened job growth in July. In fact, job growth in August was again significantly higher than in July at 142 thousand, although this is also due to the fact that the initially reported increase in July was revised down from 114 thousand to 89 thousand. With the downward revisions to June and July data, the trend has also weakened more than expected. In recent months, the increase in jobs was usually only around 100 thousand.

Nevertheless, the average working week lengthened again in August. The total number of hours worked increased slightly more than it had fallen in July.

A month ago, we pointed out that the increase in the unemployment rate was primarily due to the greater supply of labor (partly due to the wave of immigration) and less to demand-related layoffs. Although the unemployment rate fell slightly in August (rounded to two digits from 4.25% to 4.22%), a smaller proportion of those affected now classify themselves as only temporarily unemployed.

In this context, the much-discussed Sahm rule continues to sound the alarm. According to a rule established by economist Claudia Sahm, a recession is imminent if the three-month average of the unemployment rate rises by 0.5 percentage points or more from its low reached in the previous twelve months. The increase is now 0.57 percentage points, meaning that it is still above the recession threshold after 0.53% in July.

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