August Jobs: 315K New Jobs, Unemployment Rate Up to 3.7%

This morning's employment report for August showed a 315K increase in total nonfarm payrolls, which was above the Investing.com forecast of 300K jobs added. The unemployment rate rose to 3.7%.

Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:

Total nonfarm payroll employment increased by 315,000 in August, and the unemployment rate rose to 3.7 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in professional and business services, health care, and retail trade.

Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We've added a 12-month moving average to highlight the long-term trend.

PAYEMS Monthly Change

The chart here shows the pattern of unemployment, recessions and the S&P Composite since 1948. Unemployment is usually a lagging indicator that moves inversely with equity prices (top series in the chart). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The mirror relationship appears to repeat itself with the previous bear markets. The COVID-19 pandemic briefly showed the same type of relationship between equities and unemployment, though the impact was temporary and irrational exuberance took over once again.

Unemployment and the Market

Now let's take a look at the unemployment rate as a recession indicator or more specifically the cyclical troughs in the UR as a recession indicator. The next chart features a 12-month moving average of the UR with the troughs highlighted. As the inset table shows, the correlation between the MA troughs and recession starts is remarkably close.

Unemployment and Recessions

Here's another chart to illustrate the reality of the unemployment rate - the unemployment rate divided by the labor force participation rate.

The next chart shows the unemployment rate for the civilian population unemployed 27 weeks and over. This rate has fallen significantly since its 4.4% all-time peak in April 2010. It is now at 0.7%, unchanged from the previous month.

Unemployed 27+ Weeks