Markets end the day mostly higher after key jobs data shows steady slowdown

Stocks ended the first trading session of September mostly higher, but off their highs after the latest jobs report showed the labor market is continuing to cool.

The Dow rose 116 points, or 0.3%. The S&P 500 gained 0.2% and the Nasdaq Composite lost 0.02%.

The US economy added 187,000 jobs in August, according to fresh data from the Bureau of Labor Statistics. That’s above economists’ expectations of a 170,000 gain but still a slowdown from the past two years of growth.

The unemployment rate rose to 3.8% from 3.5%. Economists expected the unemployment rate to stay steady.

“From a data-dependent Fed perspective, the economic data we have seen in August in conjunction with today’s jobs report certainly reinforces the idea that we have seen the last rate hike during this cycle,” said Charlie Ripley, senior investment strategist at Allianz Investment Management.

All three major indexes gained for the week, continuing the market’s rally from the prior week after stocks wavered for much of August.

Meanwhile, Lululemon shares gained 6% as the retailer reported an earnings beat after the close on Thursday.

Dell Technologies shares added 21% after beating top- and bottom-line expectations for its latest quarter.

Robinhood shares jumped 2% after the company repurchased $605 million worth of the company’s shares that were once owned by fallen cryptocurrency exchange FTX’s former chief executive Sam Bankman-Fried.

Walgreens Boots Alliance shares fell 7.4% after the company announced that CEO Rosalind Brewer has stepped down after just under three years in the role.

Tesla shares fell 5.1% as investors worried that the EV-maker’s price slashes for some of its models would hurt its balance sheet.

As stocks settle after the trading day, levels might change slightly.

Stocks turned mostly lower on Friday as investors continued to review the latest employment report.

The Dow Jones Industrial Average index rose 63 points, or 0.2%. The S&P 500 lost 0.01% and the Nasdaq Composite fell 0.3%.

The market initially rallied Friday morning as investors cheered a slowdown in the labor market that raised their hopes that the Federal Reserve could press the brakes on its interest rate-hiking campaign sooner than expected.

All three major indexes are still on pace to close the week higher.

President Joe Biden speaks about the August jobs report in the Rose Garden of the White House on September 1, 2023, in Washington, DC.

The US economy is moving in the right direction and experiencing a strong recovery, President Joe Biden said Friday after the August jobs report was released.

“As we head into Labor Day, we ought to take a step back and take note of the fact that America is now in the strongest job-creating periods in our history, the history of our country,” Biden said in remarks from the Rose Garden.?

The president also touted his administration’s “Bidenomics” economic philosophy, saying: “It’s about investing in America and investing in Americans. It’s working.”

August’s job gains were broad-based and occurred across most sectors, with some of the largest increases seen in health care, leisure and hospitality and construction.?

Several of those critical sectors continued to claw back workers after sustaining deep job losses during the pandemic; however, many have yet to return to the employment levels of February 2020 or before.

Leisure and hospitality, which added jobs for the 32nd consecutive month with a 40,000-position net gain in August, remains 290,000 jobs, or 1.7%, below pre-pandemic totals. A big laggard within that sector has been the accommodation industry, which remains 238,000 jobs, or 11.3%, below where it was in early 2020.

Child care services added 3,000 jobs in August but remains 41,000 positions, or 3.8%, below February 2020 levels. The industry plays a critical role in the economy: Without reliable child care, parents are forced to stay home and potentially out of the labor force.

Government jobs, specifically state and local positions as well as educational roles, continue to trail pre-pandemic levels by 213,000 jobs, or 0.9%, shy of February 2020 levels.

“Coming out of the pandemic, the private sector was able to boost wages pretty rapidly, much more strongly than most public sector positions would be able to,” Dante DeAntonio, senior economist at Moody’s Analytics, told CNN. “So, they were able to scoop up that early labor supply a lot more quickly.”

He added: “More recently, you’ve seen that balance start to shift a little bit, where hiring in the private sector has slowed more definitively, wage growth has pulled back some … and at the same time, you finally see the public sector ramp up their recruiting efforts in terms of being able to offer slightly more competitive pay.”

Still, there are some shortfalls at a critical time of year.

While the public sector overall added 8,000 jobs in August and continued a 15-month stretch of job growth, state and local education saw losses of 4,900 and 10,200, respectively.

“The decline suggests that our K-12 schools are yet again starting the school year with many unfilled vacancies,” Julia Pollak, chief economist with ZipRecruiter, wrote in commentary Friday.

Stocks lost their steam Friday mid-morning after initially rallying on a slowdown in the latest job data.

The Dow Jones Industrial Average Index rose 63 points, or 0.2%. The S&P 500 gained 0.2% and the Nasdaq Composite fell 0.1%.

Still, all three major indexes are set to end the week higher, boosted by a slate of cool economic data this week that raised investors’ hope that the Federal Reserve could ease up on its interest rate hikes.

All sectors of the S&P 500 except for utilities are set to end the week higher.

Steel workers manufacture 155 mm M795 artillery projectiles at the Scranton Army Ammunition Plant in Scranton, Pennsylvania, on April 13, 2023.

The labor force participation rate rose to 62.8% in August, according to the Bureau of Labor Statistics.

That’s the highest it’s been since the onset of the pandemic; however, it remains below pre-pandemic levels.

“If sustained, this increase in the labor force could help cool off wage growth and slow inflation,” said Gus Faucher, PNC Financial Services’ chief economist, in a statement.

That’s exactly what the Federal Reserve is hoping for as it aims for a soft landing, or bringing down inflation without tanking the economy and throwing millions of Americans out of work.

Labor force participation rates have been on the decline — largely due to demographic changes — since hitting a high of 67.3% in early 2000 and had fallen to 63.3% in the month before the onset of the pandemic. The participation rate sank to 60.1% in April 2020 and has slowly crawled higher in the three-plus years since.

It’s remained below pre-pandemic levels mostly due to permanent demographic shifts, including Baby Boomers reaching retirement age, accelerated early retirements during the pandemic, deaths from Covid and workers staying home with long Covid or to care for people with Covid.

Acting Labor Secretary Julie Su during an interview with CNN's Kate Bolduan on September 1, 2023.

The White House touted the jobs report Friday, categorizing it as proof that the US economy is headed for a soft landing, where inflation comes down without disrupting the labor market.

In an interview with CNN’s Kate Bolduan, Acting Labor Secretary Julie Su said the August jobs report is “what you want to see if you are looking for a soft landing.”

“It is continued job growth,” she said, noting that the pace of monthly job gains is no longer at the “breakneck speed that we saw at the beginning of the recovery.”

The Federal Reserve is aiming for a continued steady slowdown in the labor market as businesses and households react to the 11 rate hikes the central bank rolled out to cool off demand amid decades-high inflation.

Outside of the pandemic extremes, the United States has had an unemployment rate of under 4% for the longest stretch since the 1960s, Su said.

“People have more money in their pockets and a little bit more breathing room,” Su said, noting year-over-year wage growth. “This is a sign that Bidenomics is doing what we hoped it would do.”

Workers are coming back into the labor market and workers are leaving for better jobs, Su told Bolduan.

“We are seeing not just people in the labor market, but people who have not been in it before, people who have felt maybe left out from opportunity in the past.”

The unemployment rate among Black workers fell for the second-consecutive month, continuing a downward path after suddenly spiking in recent months.

In August, the Black unemployment rate was 5.3%, a 0.5 percentage point slide from July.

The jobless rate for Black workers had been falling for much of the past year and hit a record low of 4.7% in April. However, the rate shot up nearly a whole percentage point in May to 5.6% and then jumped again in June to 6%, before dipping back down a month later.

The monthly unemployment data can be “notably volatile,” Elise Gould, an economist with the Economic Policy Institute wrote in commentary Friday.

“I’m hopeful that those upticks were statistical blips,” she wrote. “The unemployment drop was accompanied by an increase in employment, though participation softened as well.”

Workers transport equipment at Boston Metal on January 25, 2023, in Woburn, Massachusetts.

Usually when the economy adds a lot of jobs in a given month the unemployment rate ticks down. That wasn’t the case in August.

Despite the 187,000 new jobs added last month, the unemployment rate rose to 3.8% from 3.5% in July. That’s the biggest one-month jump since May. And outside of the onset of the pandemic, the last time the unemployment rate rose that high in one month was November 2011.

What gives?

By definition, the unemployment rate captures the share of unemployed people as a percentage of the labor force. The labor force is the total number of people employed and unemployed. To be considered unemployed, you don’t necessarily have to have been laid off recently.

The Bureau of Labor Statistics classifies someone as unemployed if they aren’t working but are available for work and made a specific effort in the past month to find a job. If they don’t satisfy that criteria, they aren’t considered part of the labor force.

Last month, the number of unemployed people rose by 514,000 to 6.4 million. But the number of people employed rose by 222,000 to 161.5 million. The net effect of that meant the labor force grew by 736,000 people to 167.8 million. So, mathematically, when you divide 6.4 million by 167.8 million, you’ll arrive at the 3.8% unemployment rate.

Numbers aside, this means that more people started actively looking for jobs last month even if they weren’t recently let go from their job. At the same time, fewer people had jobs.

But wait – weren’t 187,000 new jobs added last month?

That is correct. Technically speaking, nonfarm payroll employment grew by 187,000. That figure is the product of the BLS’ monthly survey of over 100,000 businesses and government agencies. However, the data used to calculate the unemployment rate comes from a different monthly survey of around 60,000 households that the Census Bureau conducts for the BLS.

Put plainly, one survey asks businesses how many people they hired and laid off last month and the other survey asks individuals if they were hired or laid off last month.?

The survey of workers found that there were 34,000 fewer transportation and warehousing jobs last month compared to July. That figure is not captured in the survey of businesses. That can help explain why the unemployment rate rose, even though there were stronger-than-expected job gains in August.

Traders work on the floor of the New York Stock Exchange during morning trading on August 31, 2023 in New York City. Stocks on the major indexes opened up high amid the release of inflation data and Department of Labor’s jobs report.

Stocks rose on Friday as a steady slowdown in the latest employment report raised Wall Street’s hopes that the Federal Reserve could ease up on its aggressive interest rate-hiking campaign.

The US economy added 187,000 jobs in August, according to data released Friday by the Bureau of Labor Statistics. That’s above economists’ expectations of a 170,000 gain, according to Refinitiv, but still a slowdown from the past two years of booming job growth.

The unemployment rate rose to 3.8% from 3.5%. Economists expected the unemployment rate to stay steady.

Traders see a 93% chance that the Fed holds rates steady at its next meeting in September, according to the CME FedWatch Tool.

Treasury yields fell following the report, as investors pared back their expectations for the Fed to keep rates higher for longer.

“Continued easing in yields could help feed the Goldilocks narrative and comparisons to the 1994-1995 soft landing,” said David Russell, global head of market strategy at TradeStation.

Meanwhile, Lululemon shares gained 2.5% after the athleisure retailer reported an earnings beat after the close on Thursday.

Dell Technologies shares added 16.3% after the company beat top- and bottom-line expectations for its latest quarter.

The Dow rose 210 points, or 0.6%.

The S&P 500 added 0.6%.

The Nasdaq Composite gained 0.7%.

Strikers walk a picket line outside Warner Bros., Discovery, and Netflix offices in Manhattan on August 18, 2023.?

The August?jobs?report showed that while employers added 187,000?jobs last month, specific industries such as transportation and film production shed?jobs.

Transportation and warehousing lost the most?jobs?of any industry last month, including a loss of 37,000 truck transportation?jobs?due to the closure of Yellow, a near-century-old trucking company that halted operations in early August as it contended with $1.5 billion in debt. That meant 30,000 of its workers were laid off.

Meanwhile, the ongoing strikes in Hollywood also showed up in Friday’s?employment?report. The motion picture and sound recording industries contracted by 17,000?jobs?in August, “reflecting strike activity,” according to the Labor Department.

Telecommunications and temporary help services also shed?jobs?last month.

Monthly job gains are still running faster than the neutral pace of 70,000-100,000 needed to keep pace with population growth, said Nick Bunker, head of economic research at Indeed.

But the labor market is slowing down, he noted, especially after the large downward revisions for the June and July data.

“August might have been surprisingly strong, but the labor market is losing momentum: The three-month moving average of job growth has fallen from 201,000 jobs in June to 150,000 jobs in August,” he said Friday.

Overall, the job market is “coming back to earth, but from a very high peak,” he said.

“Payroll gains were never going to keep up their over-400,000-jobs-a-month pace from last year. Wages weren’t going to grow indefinitely at an over 6% annual rate. The labor market was sprinting last year and now it’s getting closer to a marathon pace. A slowdown is welcome; it’s the only way to go the distance.”

The Federal Reserve building is shown May 2, 2023 in Washington, DC.

“With 187,000 jobs added, the economy may still be on a glide path to a soft landing, albeit a shakier path than expected,” said Aaron Terrazas, chief economist at Glassdoor.

“We thought the labor market was softening, but that’s not necessarily what we saw in today’s numbers. The August jobs data provides a noisy pulse on a rapidly shifting labor market,” he said in commentary issued Friday morning.

The job market is now more aligned with its pre-pandemic state, said Mark Hamrick, senior economic analyst at Bankrate.

“With steam coming out of the job market, there’s more evidence to allow Federal Reserve officials to leave rates steady in their announcement due September 20. They still have the Consumer Price Index and the Producer Price Index to digest before that.”

Friday’s jobs data “is probably the final nail in the coffin for the chances of another rate hike by the Federal Reserve in September,” agreed Chris Rupkey, chief economist at Fwdbonds.

“Wages are cooling finally and will be less supportive of higher prices in the services industries in the months to come. The economy is not falling off a cliff, payroll employment levels are still increasing, but labor market conditions need to be watched closely for any signs of further deterioration,” he wrote Friday.

“Today’s report was a big step towards a normal labor market,” said Robert Frick, corporate economist at Navy Federal Credit Union.

“The participation rate rose, more people are looking for work and the number of jobs added was in a healthy, sustainable range,” he said Friday.

“Once again, we saw the lion’s share of jobs, almost 100,000 of the 187,000 added, filling in the ranks of desperately needed health care and social assistance workers. Leisure and hospitality added 40,000 jobs, showing Americans’ appetite for having fun isn’t slowing down,” Frick said.

Construction workers stand on scaffolding while building residential housing on July 12, 2023 in Los Angeles, California.

The US economy added 187,000 jobs in August, more than expected, according to data released Friday by the Bureau of Labor Statistics.

However, that’s a slowdown from the past two years of blockbuster job growth and comes as the Federal Reserve aims to bring down inflation without triggering mass joblessness.

The unemployment rate ticked up to 3.8% from 3.5%.

Economists were expecting total job gains of 170,000 and the unemployment rate to hold steady.

Stock futures rose slightly after the report was released, with Dow futures ticking up to 172 points.

An exterior view of the New York Stock Exchange in New York on August 21.

Ahead of Friday’s crucial employment indicator, Wall Street started the month of September on a high note after wrapping up a rocky August.

Dow futures were up by 127 points early Friday, or 0.4%. S&P futures were 0.3% higher and Nasdaq futures ticked up by about 0.15%

The S&P 500 notched its worst month since February and the Nasdaq recorded its largest monthly decline so far this year.?

New economic data has dominated headlines this week: On Thursday the Personal Consumption Expenditures index, the Federal Reserve’s preferred inflation gauge, showed that Americans increased their spending in July and that price hikes also accelerated.?

That hot economic data could encourage the Federal Reserve to continue hiking interest rate hikes to tame inflation.?

Wall Street is waiting on Friday’s jobs report, which should bring more guidance on the state of the labor market and may offer clues about the Fed’s next policy move.?

A 'Now Hiring' sign is posted on the window of a business looking to hire workers in Miami on May 5.

Last month, the Bureau of Labor Statistics delivered a jobs report that only Baby Bear could offer: not too hot, not too cold, but just right.?

The US economy added 187,000 jobs in July. While that figure was well below the breakneck pace of job growth over the past three years, it was roughly in line with the monthly average seen in the decade before the pandemic.?

The unemployment rate settled back down a notch to 3.5%. The jobless rate has calmly drifted between 3.4% and 3.7% since March 2022, the month that the Federal Reserve began an aggressive inflation-fighting campaign that was wholly expected to slow demand and bring unemployment above 4%, if not close to 5%.

The August jobs report, set to be released on Friday at 8:30am ET, is expected to show that the labor market will stay in this sweet spot. Consensus estimates have net job gains at 170,000 and the unemployment rate holding at 3.5%, according to Refinitiv.

The current level of working hours, the quits rate and the rate of job growth can likely be sustained for a very long period, said Julia Pollak, chief economist with online job marketplace ZipRecruiter.

“Those are really good, solid, sustainable numbers that lead to gradual real wage growth, gradual increases in prime-age participation rates that gradually draw more people in and off the sidelines and expand the workforce and the tax base and that have all kinds of long-term benefits.”

“We could be in a place where this ‘Goldilocks’ labor market is sustainable and continues for a long time,” said Pollak. “But there are also considerable risks that the porridge may cool down too much.”

A shopper visits a mall in Miami on June 14.

The US economy is still growing, but the pace of that growth is moderating.

Consumers are still spending, but credit card debt is mounting. Delinquencies are rising. Student loan payments are about to resume. Interest rates and mortgage rates are the highest they’ve been in 22 years.

The Fed has been wanting to see more slack in the labor market in its battle to bring down inflation. An imbalance between worker demand and supply could cause wages to rise and, ultimately, add upward pressure on inflation. The central bank has tried to tame higher prices by ratcheting up interest rates in an effort to throw cold water on demand.

“Job openings are falling, and American workers are more reluctant to leave their positions right now,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in a statement on Thursday. “The job market is resetting after the pandemic and post-pandemic hiring frenzy.”

US employers announced plans to hire 7,744 workers, according to Challenger, Gray & Christmas data released Thursday morning. That’s the lowest monthly total since November 2020.?

“The biggest concern in the August report is that the wage growth could be too rapid, leading to a risk of reaccelerating inflation,” said Dean Baker, senior economist and co-founder of the Center for Economic and Policy Research, in commentary issued Wednesday.

“This would likely lead the Fed to raise interest rates further, which could bring on the recession that had long been predicted by many forecasters.”

The annualized rate of wage growth, as measured by average hourly earnings, was 4.9% during the past three months, he said. That’s up from 3.4% during the first three months of the year.

Workers prepare to lift a new pedestrian bridge into place at the Stamford Transportation Center in Stamford, Connecticut, on August 26.?

Job openings fell to 8.83 million, their lowest since March 2021, according to Tuesday’s Job Openings and Labor Turnover Survey report for July.

In addition, hiring activity slowed, a smaller number of workers quit their jobs and layoffs inched higher.?

“I’m expecting an echo of this report [on Friday], which is a slow calming of the economy,” Rachel Sederberg, senior economist with labor market research and analytics firm Lightcast, told CNN.?

Private payroll data released by ADP on Wednesday also showed a cooling, with an estimated 177,000 private sector jobs added in August, a sharp pullback after months of robust hiring.?

Nationwide, jobless claims remain well below pre-pandemic norms.?

The number of Americans making first-time claims for unemployment benefits dropped slightly last week to 228,000, according to data released Thursday by the Department of Labor.?

Initial claims for the week ended August 26 were slightly below the prior week’s level, which was revised up to 232,000.?

In the decade before the pandemic, weekly claims for unemployment benefits averaged 311,000, Labor Department data shows.?

Continuing claims, which are filed by people who have received unemployment benefits for more than one week, were 1.725 million for the week ended August 19, which is up 0.1% from the week before’s level of 1.697 million.

Economists were expecting 235,000 initial claims and 1.703 million continuing claims, according to Refinitiv.