The U.S. economy added 22,000 jobs in August, the Labor Department reported Friday, as the unemployment rate edged up to 4.3 percent—figures that come amid growing questions about the reliability of the government’s closely watched monthly employment data.
Economists had expected employers to add 75,000 workers to payrolls, with estimates ranging from 59,000 to 110,000, according to Econoday’s survey. They had forecast unemployment would rise to 4.3 percent.
The August report follows a troubling pattern of significant downward revisions that have called into question the accuracy of the initial job numbers. In July, employers initially appeared to add 73,000 jobs, missing expectations of 104,000, while unemployment ticked up to 4.2 percent.
But the July report also delivered a striking revision of earlier months: The May job estimate was slashed by 125,000 to just 19,000, while June was cut by 133,000 to 14,000. Combined, the revisions subtracted 258,000 jobs from previous estimates—a large adjustment that underscored the growing concerns about the reliability of preliminary jobs data.
The new report revised June estimate down by another 27,000, indicating that month saw a decline in employment by 13,000. The July estimate was revised up by 6,000 to 79,000. With these revisions, employment in June and July combined is 21,000 lower than previously reported.
With these revisions, the three-month average of jobs falls to 29,000, below most estimates of what the economy needs each month to keep the level of unemployment steady.
The data quality problems are thought to stem from a sharp decline in employer response rates to the government survey during the initial survey week. In July, just 57.6 percent of surveyed employers responded on time, down from 59.6 percent in June and 68.4 percent in May.
The government’s official jobs estimate is initially based on surveys from employers taken mid-month. The government continues to receive survey responses after the initial estimate, updating the jobs numbers in the following two months. By the third estimate, typically more than 90 percent of surveyed employers have responded, making the data far more reliable.
This year’s initial estimates have all been revised downward in subsequent reports, raising questions about whether the initial numbers are painting an overly optimistic picture of the labor market at a time when the Federal Reserve is weighing interest rate decisions based partly on employment trends.
The mounting concerns over jobs data prompted President Donald Trump to fire the head of the Bureau of Labor Statistics, Biden appointee Erika McEntarfer, following the July report’s release. Trump’s nominee to fill the job, economist EJ Antoni, is awaiting confirmation by the Senate.
Healthcare added 31,000 jobs in the month, below the average for the past year. Social assistance payrolls grew by 16,000. Federal government employment continued to fall, declining by 15,000 in August. Since January, federal payrolls have fallen by 97,000.
Manufacturing employment declined by 12,000 and is down by 78,000 over the year. Mining and oil and gas extraction employment fell by 6,000. Construction payrolls dropped by 7,000.
Wholesale trade employment was down by 11,7000, while retail trade rose by 10,500. Transportation and warehousing employment grew by 3,600.
Information, finance, and professional services all declined in the month. Leisure and hospitality employment climbed by 28,000.
The worse-than-expected jobs report puts pressure on the Federal Reserve to cut rates at its next meeting, which will occur on September 16 and 17. The market odds of a cut, as measured by the CME Group’s Fedwatch tool, rose to 98.1 percent on Friday morning. The Fedwatch tool is based on financial derivatives that allow traders to speculate on the odds of Fed policy moves.
Stock futures rose and bond yields declined as markets priced in greater odds of a Fed cut this month and in the months that follow.
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