Summary
The latest US nonfarm payroll report came in far below expectations, with August job growth at just 22,000. This weaker-than-expected figure has once again drawn market attention to the state of the US economy. With the Federal Reserve’s rate cut now imminent, how should we track the labour market—and what exactly is this so-called “fragile balance”?
Two Labour Market Indicators To Know
To understand how the labour market functions, we need to look at both demand and supply:
- Nonfarm Payrolls (Demand Side): Reported monthly by the US Bureau of Labour Statistics (BLS), this data tracks changes in employment based on business surveys. It covers all sectors except agriculture, private household employees, the military, and nonprofit organisations.
- Labour Force Participation (Supply Side): Based on the US Current Population Survey (CPS), this measures the number of people participating in the labour market. It includes those currently employed, actively seeking jobs, or willing to work but unable to find employment.
Together, these two metrics give us the structure of the labour market: nonfarm payrolls reflect business demand for labour, while labour force participation reflects household labour supply. Analysing them in tandem allows us to better understand current labour market conditions.
