The US economy added 187,000 jobs in August, while unemployment unexpectedly increased as the labor market continued to show signs of cooling, data from the Bureau of Labor Statistics showed Friday.
In August, the unemployment rate rose to 3.8%, up from 3.5% and the highest since February 2022. Economists had expected unemployment to remain unchanged at 3.5%. Economists surveyed by Bloomberg had expected the economy would add 170,000 nonfarm payroll jobs in August.
Revisions to the July and June jobs reports released Friday showed there were 110,000 fewer jobs created during those months than previously reported. Over the last 12 months, job gains have now averaged 271,000 per month; the economy has exceeded this pace of hiring only twice in the last nine months.
Wages, a closely watched indicator of how much leverage workers are exerting in the labor market, rose less than expected last month, rising 0.2% on a monthly basis and 4.3% over last year. Economists expected wages to rise 0.3% over last month and 4.3% over last year. Wages had risen 4.4% over the last year in July.
The labor force participation rate increased to 62.8%, the highest level since February 2020. Meanwhile, average weekly hours worked ticked up in August to 34.4, up from 34.3 in July.
"August payrolls were stronger than expected, but were paired with notable downward revisions to June and July, showing a slower job growth trend," Morgan Stanley chief US economist Ellen Zentner wrote in a note on Friday. "The report today continues to point to a labor market that is softening but not falling off a cliff."
By industry, the largest increases in Friday's data were seen in healthcare, which added 71,000 jobs.
Employment in leisure hospitality rose by 40,000 jobs, less than the 12-month average of 61,000. Employment in this industry remains below pre-pandemic levels by about 1.7%, the BLS said. Construction employment added 22,000 jobs.
Transportation and warehousing jobs declined by 34,000. Employment in truck transportation fell sharply, shedding 37,000 jobs, per the BLS. Trucking company Yellow filed for bankruptcy in August.
Last week, Fed Chair Jerome Powell described the labor market's rebalancing as "incomplete." Powell has repeatedly noted that getting inflation back down to the Fed's 2% goal will require "some softening in labor market conditions."
"We expect this labor market rebalancing to continue," Powell said in a speech at the Jackson Hole Economic Symposium. "Evidence that the tightness in the labor market is no longer easing could also call for a monetary policy response."
Since Powell's speech, early signs from other economic data have hinted that the US economy may be cooling off after a stronger-than-expected summer.
New data from ADP released Wednesday showed private employers added 177,000 jobs in August, a significant slowdown from the 371,000 jobs added in July. On Tuesday, the latest Job Opening and Labor Turnover Survey, or JOLTS report, showed job openings in July fell below 9 million for the first time in more than two years. To top it off, a consumer confidence survey revealed Americans are feeling more wary about the labor market.
"The August jobs report gives the Fed plenty of room to leave policy steady at this month's FOMC meeting," Oxford Economics lead US economist Nancy Vanden Houten wrote in a note on Friday. "The trend in job growth continued to slow, the unemployment rate rose, labor force participation increased, and earnings growth decelerated, all signs that the supply and demand for labor are coming into better balance."
Josh Schafer is a reporter for Yahoo Finance.
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