The U.S. unemployment rate fell to a five-month low of 8.4% in August, tumbling almost 2 percentage points from July’s 10.2% rate, the Labor Department said on Friday.
Nonfarm payrolls increased by 1.4 million, including the hiring of 238,000 temporary Census workers. The economy lost 22.2 million jobs between February and April as a result of the COVID-19 pandemic, and by the end of August had added back 10.6 million jobs.
“The 1.4 million increase in employment in August, while strong by historical standards, still shows the economy has a long way to go,” said Mike Fratantoni, chief economist of the Mortgage Bankers Association.
The size of the decline in the monthly jobless rate was unexpected. Economists polled by Trading Economics forecast the rate would drop to 9.8%.
“The sharp drop in the unemployment rate was certainly a surprise,” Fratantoni said. “This sudden drop in the unemployment rate does suggest that the economy could be healing more quickly than anticipated.”
The monthly unemployment report did not have the problems seen in Thursday’s initial jobless claims report because it didn’t rely as much on seasonal adjustments, said Dean Baker, senior economist at the Center for Economic and Policy Research.
The weekly claims report showed new applications for unemployment benefits tumbled 13% last week to the lowest reading since mid-March. But, it was tarnished by the use of a new methodology to seasonally adjust the numbers that wasn’t applied retroactively, creating a break in the series that made comparisons unreliable.
The monthly report released on Friday “is looking at the whole labor market, not just how many people got laid off in one week, so the seasonal issues matter much less,” Baker said.
The report showed broad gains across industries. Retail added about 249,000 jobs, professional business services increased 197,000 and transportation and warehousing was up about 78,000, the Labor Department said. Construction employment was nearly flat, the report said.