Payrolls rose 22,000 in August, less than expected in further sign of hiring slowdown

Key Concepts

• Nonfarm Payrolls: The number of new jobs added in the US economy, excluding farm workers, government employees, and non-profit employees.
• Unemployment Rate (U3): The percentage of the labor force that is unemployed and actively seeking work.
• Underemployment Rate (U6): A broader measure of unemployment that includes those who are unemployed, as well as those who are employed part-time for economic reasons and those who are marginally attached to the labor force.
• Average Hourly Earnings: The average amount of money earned per hour by workers in the US.
• Labor Force Participation Rate: The percentage of the civilian noninstitutional population that is in the labor force (i.e., either employed or unemployed).
• Interest Rates: The cost of borrowing money, typically expressed as an annual percentage.
• Debt and Deficits: The total amount of money owed by the government and the difference between government spending and revenue, respectively.

August Employment Number Breakdown

• Nonfarm Payrolls: The August jobs report showed a gain of only 22,000 jobs. This was a significantly lower number than expected. The previous month's number was revised subtly to 79,000. The two-month revision totaled -21,000.
• Unemployment Rate (U3): The unemployment rate increased to 4.3%. This is the highest rate since the November/October 2021 period when it was 4.5%.
• Average Hourly Earnings: Average hourly earnings increased by 0.3%, which was in line with expectations. Year-over-year, average hourly earnings increased by 3.7%, which is a decrease from the previous month's 3.9% and the expected 3.8%. This 3.7% figure takes us back to mid-2021 levels.
• Hours Worked: Hours worked came in at 34.2, which is the second lowest of the year. The year started at 34.1. This is a key indicator, as a drop in hours worked can sometimes precede layoffs.
• Labor Force Participation Rate: The labor force participation rate decreased to 62.3%. This is one-tenth better than expected and equal to where it was in June. The rate has been steadily moving lower. To find a higher one, you have to go to May at 62.4.
• Underemployment Rate (U6): The underemployment rate increased to 8.1%, which is the high of the year. This rate takes us back to the fall of 2021.

Interest Rate Impact

• Interest rates started dropping before the data was released.
• Around five minutes before the number, interest rates were hovering around 4.1310. They got as low as 4.09 and are currently hovering at 4.11.
• The previous week's close was at 4.23, and the low close of the year is around 4%. This 4% level is what everyone will be watching, both intraday and on a closing basis.

Key Arguments and Perspectives

• The speaker notes that the soft jobs data could mean no increases in interest rates.
• There are two ways to look at hours worked: employers may give remaining employees more hours before hiring new people, or hours may drop before layoffs.
• The speaker emphasizes that debt and deficits may weigh on the economy, regardless of how soft the data is.

Notable Quotes

• "Good job BLS" - referring to the Bureau of Labor Statistics releasing the data on time.
• "I don't care how soft the data is, debt and deficits may weigh" - emphasizing the importance of debt and deficits in the overall economic picture.

Synthesis/Conclusion

The August employment report revealed weaker-than-expected job growth, an increase in the unemployment rate, and a decrease in the labor force participation rate. While average hourly earnings were in line with expectations, the year-over-year growth rate slowed down. The underemployment rate also increased. These figures suggest a potential softening of the labor market. The speaker highlights the importance of monitoring interest rates and the impact of debt and deficits on the economy, regardless of the employment data. The 4% level for interest rates is identified as a key level to watch.