The August jobs report is highly anticipated as the Federal Reserve contemplates raising interest rates to try to slow economic growth and tamp down price increases \u2014 without damaging the labor market. <\/p>\n
A jobs report showing a significant rebound from July\u2019s negative 23,000<\/a> change in nonfarm payroll jobs, with unemployment holding steady in the low 4% range, would give the Fed more room to raise rates. <\/p>\n Ahead of the release, expectations for job creation were all over the map, ranging from 58,000 more jobs<\/a> to zero jobs<\/a>.<\/p>\n And \u2014 from a purely \u201chealth-of-the-labor-market\u201d perspective \u2014 either outcome could be fine, a recent research paper<\/a> by economists at the Federal Reserve Bank of Dallas argues. That\u2019s because job creation in that range can still leave the unemployment rate at historically low levels.<\/p>\n In an August 20 appearance on CNBC, Treasury Secretary Scott Bessent portrayed July\u2019s dismal jobs report as part of a positive trend<\/a>.<\/p>\n “The jobs that we’re seeing are going to Americans,\u201d he said. \u201cAfter the deportations that we’ve seen during President Trump’s administration, and the closing of the border \u2014 this unfettered migration \u2014 we don’t need to produce as many jobs.\u201d<\/p>\n Is the treasury secretary correct? Can the economy actually have lost 23,000 jobs in July, and have added only 20,000 jobs per month on average<\/a> from May through July, and still call this a healthy labor market? <\/p>\n \u201cWe\u2019re likely to have months where we see negative job growth, but the unemployment rate will not increase,\u201d said Joe Brusuelas, chief economist at consulting firm RSM, \u201cwhich is sure to confuse the American public.\u201d<\/p>\n Persistent monthly declines in payroll jobs are typically associated with recessions, rising layoffs, and a sharply escalating unemployment rate.<\/p>\n But that\u2019s not true right now, said economist Justin Bloesch, economics professor at the Cornell University School of Industrial and Labor Relations.<\/p>\n \u201cIf you tuned into jobs reports in the past, you\u2019d be used to 100,000 jobs, 200,000 jobs being a good number,\u201d Bloesch said. \u201cIf you are used to seeing big numbers and think, \u2018Zero jobs is bad news,\u2019 that\u2019s just no longer the case.\u201d<\/p>\n It\u2019s part of the changing political and economic state of the country.<\/p>\n \u201cImmigration has gone into decline, deportations are also up, and the Baby Boomers are retiring<\/a>,\u201d he said. \u201cSo, you would expect the economy, on average, actually will not add jobs \u2014 because the labor force is not growing.\u201d<\/p>\n Nicole Bachaud, a labor economist at ZipRecruiter, put the trend in historical perspective.<\/p>\n \u201cThe labor market is shifting pretty rapidly, especially when we look at the demographics of the U.S. population and how that\u2019s changing who is available to work,\u201d Bachaud said. \u201c20 years ago, if we had negative-23,000 jobs, it would be very different. But with fewer workers in the market looking for work, we don\u2019t need as many jobs in order to maintain a stable unemployment rate.\u201d<\/p>\n This can be explained by a concept in economics called \u201cbreak-even job growth,\u201d said Heidi Shierholz, former chief economist at the U.S. Department of Labor and now president of the Economic Policy Institute.<\/p>\n \u201cIt\u2019s how many jobs you need to just keep the unemployment rate steady,\u201d she said.<\/p>\n After a surge in immigration during the Biden Administration, \u201cU.S. population growth has slowed to a crawl<\/a>,\u201d Shierholz said. \u201cThe thing that had been keeping the break-even rate higher was net immigration. But due to the Draconian immigration enforcement regime that we have in place now, that has totally tanked.<\/p>\n \u201cWhen Trump took office,\u201d Shierholz continued, \u201cbreak-even job growth per month was likely around 120,000. Now, the highest estimates are around 50,000, and many are much lower \u2014 like zero. However you slice it, we now need way fewer jobs.\u201d<\/p>\n And that\u2019s exactly what we\u2019ve seen, according to Shierholz. <\/p>\n \u201cJobs added each month has really tanked,\u201d she said. \u201cAnd we haven\u2019t seen too much of an increase in unemployment<\/a>. So that\u2019s positive. The drawback is, reduced job growth really reduces labor-market dynamism.\u201d<\/p>\n That\u2019s so-called labor-market churn, when a lot of workers are changing jobs, quitting and landing new jobs, which often leads to better job matches, more promotions and higher pay.<\/p>\n