The U.S. jobs report for August will be reported on September 1 at 8.30am ET. Unemployment is expected to remain within the historically low range of 3.4% to 3.7% that it has maintained since March 2022.
This is, in part, as the economy continues to grow in Q3 according to nowcasts from Atlanta Federal Reserve, and less optimistic but still positive assessments from economists. However, economists will be watching for sector-level trends that might signal where the U.S. is heading.
Sector Trends
As the Bureau of Labor Statistics recently reported, job openings and hiring are down for June 2023 as compared to 2023. This is true for almost all industries, though government job openings have risen, and hiring is up slightly within the federal government and for education and health services.
This may suggest, that the economy has returned to a more normal footing after the pandemic, with many industries no longer desperate for workers to keep up with returning demand. Inflation also cooling further supports this view, if the trend continues.
Certain industries that fueled more robust job growth earlier in 2023, appear to have slowed. For example, in July both leisure and hospitality and professional and business services saw far weaker job growth than earlier in 2023. However, other sectors such as healthcare and construction continued to add workers at a pace consistent with much of 2023. So there is less activity in certain parts of the economy, but there is not yet sufficient cooling to be a real concern as most sectors continue to add jobs and aggregate job growth is healthy.
Revisions
For August’s report for the month of July revisions to prior data were a slight concern. Estimates of job growth for May and June were both reduced materially, albeit still implying clear levels of job growth.
However, as job growth has slowed slightly over recent months, further negative revisions would be more of a worry. The Federal Reserve’s assessment from July that job growth has been “robust” may still prove defensible, but the Fed may have to watch the jobs market a little more closely if the upcoming report is soft and contains further negative revisions to prior months.
Unemployment Claims
Unemployment claims have moved up generally over 2023, though this is a noisy series and like the unemployment rate, unemployment claims remain low by historical standards. We have some way to go before claims become a concern, but they are less encouraging than earlier in the year and may lend some support to unemployment tracking a little higher as 2023 draws to a close.
The Fed’s Reaction
Over recent months, the Fed has been able to focus almost exclusively on fighting inflation since the jobs market has remained historically strong, giving the Fed very little to worry about.
However, that balance might be shifting. Inflation is now a little more restrained and the unemployment situation, though clearly not weak, is perhaps a little less rosy than it was earlier in the year. The upcoming jobs data will help refine that assessment before the Fed set interest rates on September 20. If unemployment is less robust, then the Fed may be a little less inclined to raise rates again in 2023 as is possible in November on some estimates. However, for now, inflation rather than jobs remains the Fed’s overriding concern and there is increasing evidence that the U.S. economy may have dodged a much-anticipated 2023 recession.
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