The biggest August jobs beat in nearly 30 years may be less impressive than it looks: Chart of the Day

The August jobs report looked like a blockbuster. Look inside the 162,000 headline and the story changes fast.

Employers added 162,000 jobs, nearly triple the 55,000 economists expected. The number beat all 76 forecasts among surveyed economists, and Kevin Gordon, head of macro research and strategy at Schwab, noted it was the biggest August upside surprise versus consensus in data going back to 1998.

After months of labor market whiplash earlier in the year, it would be easy to conclude that hiring suddenly kicked into a higher gear.

Two volatile corners of the job market say otherwise.

Restaurants and bars added 59,000 jobs, while local government education added 42,000. Together, that’s 62% of the entire August gain. That leaves 61,000 for the rest of the economy.

But both of those big gains come with an asterisk.

Restaurants and bars had averaged only 12,000 new jobs a month over the prior year. The education gain largely reversed a drop in July.

Bloomberg Economics went further, saying an unusually mild seasonal adjustment — likely reflecting World Cup disruptions to normal leisure and hospitality hiring patterns — explained almost all of the upside surprise.

Concentrated hiring isn’t new. Back in May, the jobs report had its own “Magnificent Three,” when leisure and hospitality, local government, and healthcare accounted for nearly all of the month’s hiring.

None of that makes August a weak report.

The prior two months were revised higher, wiping away July’s initially reported job loss and making the summer slowdown look less severe than it did a month ago. Participation also rose for the first time in nearly a year while unemployment held at 4.1%.

In other words, the summer jobs slump now looks less severe than the month-to-month headlines made it seem. Worker pay offered another clue. Wage growth cooled a bit even as employees put in slightly longer hours — more income flowing to workers without an obvious surge in wage pressure.

RSM chief economist Joe Brusuelas zeroed in on where the hiring came from on Yahoo Finance Friday morning.

“The composition of the report was decisively tilted towards lower-wage jobs.”

That helps explain how Friday’s report can look stronger without looking especially inflationary. It also leaves inflation as the bigger question for the Fed.

Gordon also saw encouraging breadth outside the two volatile categories. But he pushed back on treating 162,000 as the start of a new jobs boom.

“It’s not an overheating impulse.”

Jared Blikre is the global markets and data editor for Yahoo Finance. Follow him on X at @SPYJared or email him at [email protected].

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