August Jobs Report Commentary from MBA's Mike Fratantoni

The following is MBA SVP and Chief Economist Mike Fratantoni’s reaction to this morning’s U.S. Bureau of Labor Statistics report on employment conditions in August:

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“Payroll employment increased in August, but with the markdowns in the rate of job growth for June and July noted in this report, the cumulative effect is a noticeable slowdown in the job market. Job gains are now averaging only 150,000 over the past three months. As in prior months, job growth is increasingly concentrated in just a few sectors like hospitality and health care, indicating that the pace of growth could slow much faster if these sectors were to cool down.

“The jump in the unemployment rate to 3.8% was caused by an increase in the labor force participation rate. More people are actively looking for work, but new or re-entrants to the labor market in August were not having much luck, pushing up the numbers of those unemployed for less than five weeks. This makes sense, given the report of businesses pulling back job openings over the past few months. Unfortunately, some started looking for work just as business demand for workers has begun to decline somewhat. Keep in mind that there are still many more job openings than unemployed individuals.

“Wage growth slowed a bit in August to 4.3% on an annual basis, which is still likely too high to be consistent with the Fed’s 2% inflation target.

“This report should be enough for the Fed to keep the federal funds target rate on hold at its next meeting. We expect that they will hold here until next spring, and their next move should be cut. The combination of a still strong job market, and rates that should trend down over time, is positive for the housing market.”