U.S. Jobs: Fewer Jobs Added, Higher Unemployment = Good News?

Earlier today, in advance of the Labor Day holiday weekend, the U.S. Bureau of Labor Statistics (BLS) released its Employment Situation Summary for August. For that month, 187,000 jobs were added, and unemployment increased from 3.5 to 3.8 percent.

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The news is both good and bad. This is the lowest three-month total job gain of the past three years (revised totals for June through August come to 449,000, or roughly 150,000 jobs per month), according to the Washington Post. At the same time, unemployment rose from 3.5 percent to 3.8 percent, climbing to, as the Post put it, its "highest level since February 2022.:

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Despite all of that, today markets are mostly flat and most coverage of this jobs report takes a positive spin. What gives?

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Behind the Top Numbers ... More Numbers

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One reason for the jump in unemployment is an increase in the number of people looking for a job. That count grew by 736,000 for August, and represents the biggest influx of potential new or returning workforce members since last January. Please note: the US BLS only counts people who are actively seeking a job, but not currently working, as unemployed.

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So this jump in unemployment serves as a sign of added strength in the job market, surprisingly enough. That ties into overall workforce participation and engagement, measured in August at 62.8 percent, because it counts those working alongside those actively seeking employment.

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This is the highest level for that number since February 2020, the last month of workforce data that did not include major impacts from the COVID epidemic.

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Another reason for treating possible bad news in a positive light is that wages are not growing as fast as they had been. The delta from July to August was 0.2 percent, down from previous monthly deltas. Year-over-year wage growth is up 4.3 percent as compared to August 2022. For the year-to-year periods back to June and July 2022, that figure was 4.4 percent.

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So this shows a slight decrease in wage growth, and gives some sign that such growth is flattening (if not slowing dramatically). Good news for those concerned about a resurgence of inflation (reported at 3.2 percent for July 2023, the latest such figures currently available). The net effect is that wage growth is slightly ahead of inflation (good news for workers) but not dramatically so (good news for employers and the overall economy).

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In issuing its monthly reports, the BLS also revises job growth figures for the two preceding months. This latest report dropped the numbers for both June and July. The June numbers dipped by 80,000 (from 185,000 to 105,000), while July fell by 30,000 (from 187,000 to 157,000).

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This puts the August number — 187,000 — ahead of both of them, and also shows job growth slowing but still continuing. July and August exceed this trailing quarterly average (around 150,000), while June falls about 30 percentlower. This shows a slight upward trend in job growth despite lower numbers overall.

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That's just the kind of thing that can be interpreted as the "soft landing" the Fed has been chasing since the pandemic recovery began in earnest in 2022.

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Jobs Report Details, Explored

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The 187,000 jobs added for August is about 41 percent below the trailing 12-month average of 271,000 for the period from September 2022 through August 2023. Here are some highlights from those August numbers:

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Healthcare jobs increased by 71,000, in line with July results. Of that number, 41,000 came from ambulatory health care services, 17,000 from nursing and residential care facilities, and another 15,000 from hospitals.

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Leisure and hospitality added 40,000 jobs, about one-third below the trailing 12-month average of 61,000 jobs in that sector, which still trails pre-pandemic levels from February 2020 by 1.7 precent (290,000 jobs).

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Social assistance employment grew by 26,000 jobs, slightly better than the trailing 12-month average of 22,000 jobs in this sector. Of that total, 21,000 jobs came from individual and family services.

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Professional and business services jobs increased by 19,000, continuing a nearly flat course since May. Professional, scientific and technical services accounted for 22,000 of that number, offset by a 19,000 dip in temporary help services (this sector has declined by 142,000 since it peaked in March 2022).

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Construction employment waxed by 22,000 jobs, about 5,000 higher than the trailing 12-month average (17,000 jobs). Of that number, 11,000 came from specialty trade contractors, and another 7,000 from heavy and civil engineering construction.

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Transportation and warehousing lost 34,000 jobs, with 37,000 jobs dropped in truck transportation in the wake of the Yellow Freight bankruptcy and cessation of business activities. Couriers and messengers also lost 9,000 jobs, offset by a 3,000 job gain in air transportation. Overall, this sector has been mostly flat over the past 12 months after major gains during the pandemic that reflected a shift from in-person to online shopping.

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Information dropped by 15,000 jobs in August, of which a loss of 17,000 jobs came from motion picture and sound recording industries (a function of the decline driven by the writers' and actors' ongoing strikes), with another 4,000 jobs lost in telecommunications. Indeed, information has been mostly flat for the past year and more.

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Other major sectors that the BLS tracks were mostly flat in August. These include mining, manufacturing, wholesale and retail trades, financial activities, other services and government. This mix of some sectors gaining and other sectors waning is a more typical sign of normal economic activity where modest and ongoing up-and-down activity occurs routinely and regularly.

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The CompTIA Perspective

CompTIA tracks information employment in terms of two primary sectors: tech sector (companies that build IT systems and solutions, and that offer IT-related services) and tech occupation employment (jobs in other companies outside the tech sector, but related to information technology functions performed in-house).

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In its Sept. 1 reporting, CompTIA describes an up-and-down situation in August. Tech sector employment was up for August (by 12.5,000 jobs) while tech occupation employment was down by 189,000 jobs. For the first time in some while, they also report a jump in unemployment for tech occupation jobs, from 1.9 percent to 2.1 percent for the month.

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Their press release characterizes this activity as a kind of "seesawing between strong and lagging tech jobs reports," but hastens to observe that "the overall macro trend of growth in the depth and breadth of the tech workforce remains steady" (quotes from Tim Herbert, Chief Research Officer at CompTIA).

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It looks like the same dip in the speed and force of job growth for the overall economy writ large is at work in the narrower confines of the information sector (which translates mostly into what CompTIA tracks as "tech occupation employment" in its August jobs report).

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Where To From Here?

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Ideally, the months ahead would fall in a range of between 150,000 and 200,000 jobs created, with inflation continuing its downward trend at the same time. Absent major hiccups in the world situation, such as the war in Ukraine, natural disasters, market collapses, and such, this looks very much like the glide path to a soft landing that the Fed has been trying to engineer since it started its ongoing round of interest rate hikes in 2022.

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Stay tuned! It's always interesting to see what happens next. Given that IT unemployment still remains only about two-thirds of the overall unemployment rate, we who labor in that sector (or sectors, if you see things as CompTIA does) get to watch from a position of relative strength!