The Line: Job Growth Weaker than Expected in August

It’s the first day of the month, so today’s all about jobs. Welcome to the “bad news can sometimes be good news” edition of The Line.

Job Growth Weaker Than Expected in August

Payrolls rose by just 22,000 last month, much lower than the 75,000 forecast. You may now want to just skip down to the last two paragraphs where I tell you why this is good news, but for those that want all the depressing labor market data here it goes:

• The unemployment rate rose to 4.3% from 4.2%.
• June’s hiring data was revised downward by 27,000 to -13,000, making it the first month of job losses since April 2020.
• July’s figure was revised up by 6,000, but employment for June and July combined was still 21,000 lower than prior estimates.
• Hiring continues to be led by health care (+31,000) and social assistance (+16,000), while federal government employment fell by 15,000 and is down 97,000 since January.
• It’s taking unemployed workers an average of 24.5 weeks to find a new job, the longest time since April 2022.

There were some bits of decent news in the August jobs report:

• Wages rose 0.3% last month and were 3.7% higher than a year ago. So, even with weak hiring wages are still rising faster than prices.
• The household survey—which is used to calculate the unemployment rate—had employment up by 288,000 in August. It also showed growth in the labor force, which is the number of people either working or looking for work.
• The ADP survey for August showed a 54,000 increase in jobs, which gives some hope the BLS data will be revised upward next month.

To sum up, this August jobs report shows a softening labor market with weak hiring and rising unemployment. The good news is that this report most likely guarantees a Fed rate cut later this month. As of 10:30 this morning, CME FedWatch had the odds of a 25-basis point cut in September at 86.9%, and the odds of a 50-basis point cut at 13.1%. That means a 100% chance of a rate cut of at least 25-basis points.

While the Fed cuts have no direct correlation to mortgage rates, the weak August jobs figures will dampen the economic outlook, which in turn should bring down inflation expectations and long-term rates. And for one last bit of good news, this week, mortgage rates fell to their lowest level since October 2024. Lower mortgage rates combined with rising inventories should bring the homebuyers out in large numbers in the coming weeks.