Only about 22,000 jobs were added to the U.S. economy in August and the unemployment rate crept up to 4.3%, according to the U.S. Bureau of Labor Statistics.
The dismal jobs report likely increases the prospect of a Fed rate cut later this month. That will be welcome news to prospective home buyers – however, mortgage rates are unlikely to drop much after the Fed initially takes action. It will likely take several rate cuts before buyers see rates drop in a meaningful way.
The number of unemployed people, at 7.4 million, was up from 7.2 million in July.
Among the unemployed, the number of new entrants decreased by 199,000 in August to 786,000, largely offsetting an increase in the prior month, the BLS says. New entrants are unemployed people who are looking for their first job.
The number of long-term unemployed – those jobless for 27 weeks or more – increased slightly to 1.9 million, up from 1.8 million in July.
The number of long-term unemployed has increased by about 385,000 so far this year. In August, the long-term unemployed accounted for 25.7% of all unemployed people.
The labor force participation rate was basically flat at 62.3%. The employment-population ratio was also basically flat at 59.6%.
Average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents, or 0.3%, to $36.53 in August. Over the past 12 months, average hourly earnings have increased by 3.7%.
“As football season kicks off, August’s jobs report may be the turnover that forces the Fed to change its play calling—starting with its potential 25 basis point rate cut at its September meeting,” says Sam Williamson, senior economist for First American, in a statement. “The underwhelming jobs report reinforces the picture of a labor market that’s losing momentum without collapsing. The three-month average now stands at 29,000, a clear slowdown from earlier in the year.”
“Revisions to prior months added to the softness,” Williamson says. “June’s figure was revised down to a loss of 13,000 jobs, while July was revised up to 79,000, resulting in a net two-month revision of -21,000. The unemployment rate increased to the highest since October 2021, and is a key metric the Fed is watching closely for signs of slack. Meanwhile, labor force participation ticked up, suggesting more workers are entering the game even as hiring slows.”
“With inflation not reaccelerating and job growth fading, the Fed may see this as an opportunity to recalibrate—shifting policy back toward neutral, rather than launching a full pivot to stimulus,” he adds. “A rate cut in September would mark the first step in that adjustment, and could put downward pressure on long-term yields, offering some relief to prospective home buyers facing elevated mortgage rates and prices. For those still on the sidelines, this could be the opening drive that begins to move the chains on affordability—especially if inventory improves and price growth continues to moderate.”
Photo: Saulo Mohana