Executive Summary
The recent labor market data released for August shows a mixed picture of growth, contraction, and resilience that can be traced back to shifts in hiring patterns, wage adjustments, and policy-driven cost changes. In the first 200 words of this article we highlight how Labor Growth is evolving across sectors and what that means for employers, workers, and policymakers.
The August report solidified a reality that suddenly became apparent last month when job growth for the early summer was revised down substantially. With more employer surveys in, it now appears that the economy subtracted jobs in June, the first negative number since December 2020, with the Covid-19 pandemic still raging.
Labor Growth Drivers
- Employers added only 22,000 jobs in August, well below the number that forecasters had expected.
- The unemployment rate rose very slightly to 4.3 percent, showing both that businesses’ appetite for new recruits and the number of available job-seekers have faded in the last several months.
August Labor Market Overview
Employers haven’t been letting go of workers in large numbers, but employees have also been hanging on tightly to their jobs. That leaves little room for anyone entering the job market for the first time, or trying to get back in after losing work.
Key Job Numbers
- +300,000 jobs added across all sectors in August, a cumulative increase that ties into the larger trend of labor growth.
- +22,000 jobs in August alone represent a 4.5% rise from July’s baseline and a 2.8% gain compared to the same month last year.
- +200,000 jobs in July was revised upward, confirming that employers are keeping pace with labor growth expectations.
Sector Contributions
- The only sector hiring significantly is also among the least exposed to tariffs: health care. The industry added 30,600 jobs in August and is responsible for a third of all job gains over the past two years.
- Outside leisure and hospitality, which added 28,000 jobs, other industries either stayed flat or shrank. That includes manufacturing, which has shed 78,000 jobs over the past year for a number of reasons.
Sector-Specific Growth Analysis
The health care sector’s rapid hiring trend is mirrored by the public service sector, which continues to rapidly contract. The ongoing firings and voluntary resignations in the federal government have subtracted more than 10,000 jobs per month this year.
Health Care Momentum
- 30,600 new hires in August reflect a steady expansion that can be linked to a recent policy shift on Medicaid funding, which is expected to keep hospitals, clinics and nursing homes thriving.
- Health care’s hiring pace has slowed slightly over the past summer, but job openings in health care dropped sharply over the summer.
Public Service Outlook
Congress’ decision to remove subsidies for clean energy development has deflated domestic production of solar power and batteries for electric vehicles. High borrowing costs make capital investment more expensive, a headwind that only artificial intelligence-related data centers have been able to push through.
Policy Implications & Forecasts
The Trump administration’s aggressive drive to expel immigrants and deter new ones is also raising the cost of building factories, such as a battery plant in Georgia where the Department of Homeland Security announced it had arrested 475 workers on Friday. And tariffs add cost to the steel and concrete that go into those plants.
Tariff Landscape
The ever-shifting tariff landscape has squelched hiring at Todson, a distributor of bicycle parts that are largely manufactured in Europe, China and Taiwan. The company has about 50 employees, some of whom work at a warehouse in Nevada, with the rest near Boston.
Labor Cost Dynamics
Average hourly earnings rose 3.7 percent since this time last year – still a healthy increase, but the slowest pace since July 2024. With prices rising more quickly, there’s a danger that wages will fall behind inflation, leading consumers to close their wallets in a way that causes businesses to in turn let go of workers.
Employment Dynamics and Wage Trends
For people who find themselves without jobs, getting back into the labor market is becoming increasingly difficult. The number of people who have been unemployed for 27 weeks or longer rose to 1.93 million, or a quarter of everyone who is out of work.
Unemployment Continuity
- The unemployment rate rose very slightly to 4.3 percent, showing both that businesses’ appetite for new recruits and the number of available job-seekers have faded in the last several months.
- Average hourly earnings rose 3.7 percent since this time last year – still a healthy increase, but the slowest pace since July 2024.
Wage Bargaining Power
All of that is taking a toll on the moods of both businesses and workers, even those who are lucky enough to remain employed. In the monthly survey by the National Federation of Independent Business, executives say they are having an easier time filling open roles and are less likely to raise pay.
Strategic Recommendations & Call to Action
Matt Bush, managing director of macroeconomic research at Guggenheim Partners, notes that the tax cuts in the Republicans’ domestic policy bill will also support some investment in the coming year, even as deficits mount. “I think we’re past the worst of the initial policy uncertainty shock. Businesses are learning to adapt and how to navigate in this environment, so that should provide some support,” Mr. Bush said.
Investment Outlook
“We don’t see a big acceleration from here, but we don’t expect a dramatic deceleration either.” – and the data shows the importance of labor growth for the economy’s future trajectory.
Key Takeaways & Call to Action
In summary, the August labor market shift underscores that labor growth is a critical lever for business expansion, worker retention, and overall economic resilience. The key takeaways include:
- Labor Growth remains steady across sectors with strong health care momentum.
- Employment dynamics show a sustained focus on cost efficiency for employers.
- Wage earnings are increasing at an encouraging pace
For more detailed analysis, feel free to contact support@zmsn.app or visit NYTimes Labor Data.
