Strong job gains, labor force growth in August signal cautious optimism for labor market rebound

The job market was as sunny as the weather in August, per the latest jobs report from the Bureau of Labor Statistics.

After a few months of concerning jobs data, employers reported stronger-than-expected job gains, while labor force participation ticked up after declining for several months. While experts caution that continued job gains are needed in the months ahead to confirm a true recovery, August’s report is still a positive first sign of rehabilitation from the sluggish labor market seen recently.

Diving into the data. Employers added 162,000 jobs in August, more than triple the 53,000 that economists surveyed by Dow Jones had expected. Revisions to June and July data saw improved hiring for those months as well. June was revised upwardly from 20,000 to 31,000 jobs, while July, which initially reported a 23,000 decline in payroll, was revised to have added 21,000 jobs.

Many blue-collar, deskless, and service-based industries reported strong gains in August. Food services and drinking reported the strongest job growth by industry, adding 59,000 jobs. Construction, manufacturing, and trade, transportation, and utilities also reported payroll growth, while healthcare, which has accounted for the majority of job growth in recent years, reported gains of 13,000, well below half its 12-month average of 32,000.

Some white-collar sectors, on the other hand, reported declines in payroll, particularly information and financial activities, which fell by 23,000 and 11,000, respectively. On the other hand, professional and business services reported job gains of 10,000.

Job openings have increased in recent months, potentially leading to more movement among workers in August. The unemployment rate stayed flat at 4.1%, while the labor force participation rate rose slightly to 61.6% after falling consecutively for the prior eight months. Similarly, the share of individuals employed part-time for economic reasons fell by 414,000, to 4.4 million in August, while the amount of people marginally attached to the labor force (those who wanted and were looking for a job in the last 12 months, but hadn’t looked in the month preceding the survey, as well as discouraged workers who didn’t believe there were jobs opportunities for them) declined as well.

“Overall we’re seeing some positive signs that the labor force, workers themselves, are feeling a little bit more optimistic about this market,” Nicole Bachaud, a labor economist at ZipRecruiter, told HR Brew, adding that labor turnover could pick up on the coming months, should workers continue to see a broad range of opportunities from employers. At the same time, though, Bachaud cautioned that August’s report is just one month of strong job gains, and that the labor market has experienced a lot of volatility and fragility in recent months, and factors like rising inflation, a potential interest rate hike, or continued geopolitical tensions could hamper continued job growth in September and subsequent months.

Similarly, Raj Namboothiry, head of ManpowerUS, said that while it is too early to consider August’s job gains an inflection point, as job growth needs to be more sustained, it’s still an early positive sign.

“The market may still be cautious, but the direction of where we are headed is far more positive and constructive,” he told HR Brew.

Zoom out. Looking ahead, employers should anticipate a labor market recovery in the next four to six quarters and begin planning for how they will navigate, Namboothiry said. The employers who come out on top will be those looking proactively at their current employees’ skills, how the most-needed skills might change, and how they can acquire those skills, whether through hiring or developing talent.

“Employers have to look around the corner and understand the demand cycles, because it will return, and the winners will be on the front end, just starting to add that strong talent pool,” he said. “Don’t hire recklessly, but this is not the time to continue to exercise a lot of caution. Don’t get flat-footed.”

Bachaud recommended that, as job opportunities continue to open up, employers consider candidates who may not have traditional experience, but have transferable skills or the potential to develop other skills critical to the role.

“We’re seeing the skill sets demanded within jobs kind of converging across some industries, and so looking at people who don’t necessarily have this traditional background you’re used to hiring for can really expand that pool of opportunity to find the right fit as jobs themselves are changing so rapidly,” she said.