MBA Chart of the Week: Monthly Payroll Growth and Unemployment
Source: Bureau of Labor Statistics
Job growth slowed to just 22,000 jobs in August and estimates for the prior two months were revised down by 21,000. The revised estimate shows a net loss in June, and the unemployment rate rose to 4.3%, the highest level since October 2021. The job market is softening, with even sectors like health care, which had steadily contributed to job growth, now slowing. The 12-month moving average of 122,000 jobs added slipped to the slowest pace since early 2021. Job losses continued in the federal government and manufacturing sectors. Wage growth at 3.7% over the past year is steady, but it is certainly running at a slower pace than a year ago.
While the headline unemployment rate increased to 4.3%, what was more notable was the larger increase in the U-6 to 8.1%, with more workers only able to find part-time work or becoming discouraged by the lack of job openings, and the continued increase in the length of unemployment spells. The average duration of unemployment was almost 25 weeks, and more than 25 percent of unemployed workers have been out of work for 27 weeks or longer. While the pace of layoffs has picked up somewhat, the hiring rate remains quite low. It is increasingly difficult for those laid off, and for new entrants into the job market, to find a position.
The slowdown in the job market should be more than enough for the FOMC to cut its short-term rate target at its September meeting, as this is not a picture of an economy at “maximum employment”, and the greater risk now appears to be that the job market will slip further in the months ahead.
MBA’s forecast is for the unemployment rate to continue to increase, reaching 4.7% at the end of 2025, as businesses remain conservative with their hiring given the weakening economic climate. However, the pace of any additional cuts will certainly be tempered by the ongoing risk of a pickup in tariff-induced inflation.
–Mike Fratantoni (mfratantoni@mba.org); Joel Kan (jkan@mba.org)
