MNI DATA IMPACT: US Jobless Rate Unexpectedly Dips to 8.4%

The U.S. unemployment rate fell below 10% in August for the first time since initial Covid-19 shutdowns in March, a faster recovery than expected, but the pace of job growth tapered after several months of large gains, the Bureau of Labor Statistics reported Friday.

Total nonfarm payrolls grew by 1.37 million in August, just above market expectations for a 1.35 million gain, slowing from July's 1.8 million. A quarter of the gain in employment was accounted for by government hiring, and the vast majority of those jobs were temporary positions related to the 2020 Census.

Net revisions for the previous two months were a negative 39,000, the BLS said, bringing the three-month average gain to 2.6 million. The labor market recovery through August has only recouped less than half of the 22 million jobs lost between March and April.

The unemployment rate shot down 1.8 percentage points to 8.4% from 10.2% in July when financial markets had only expected a 0.4 percentage point drop to 9.8%. A misclassification error that has dogged the BLS's estimates of unemployment since the onset of the Covid-19 pandemic was again present in August, but would have only pushed up the reported unemployment rate at most by 0.7 percentage points.

The U-6 rate, which accounts for discouraged workers, fell to 16.5% from 18.0% in July, as permanent job losers rose by 534,000 to 3.4 million, up 2.1 million since February, the BLS said.

The employment-to-population ratio rose 56.5% from 55.1% in July, signalling strong employment growth. The labor force participation rate in August recovered three-tenths to 61.7% from 61.4% in July but remained 1.7 pps below February's level.

SERVICES HIRING SLOWS

Government payrolls rose by 344,000 in August as the Census Bureau ramped up hiring (+238,000) for the 2020 Census, the BLS said.

Total private payrolls were up 1.027 million in August, slowing from a 1.48 million gain in July. That increase was led by service industries including retail trade (+248,900) and professionals and business services (+197,000). Education and health services payrolls grew by 147,000 in August, slowing from July's 222,000 increase.

Leisure and hospitality payrolls, which have seen unprecedented growth since May when most state lockdowns and safer-at-home orders expired, slowed markedly in August, growing by only 174,000 after a 621,000 gain in July. The leisure and hospitality sector gained nearly 2 million jobs in June.