KPI – August 2026: State of the Economy

Employment

Total nonfarm payroll employment decreased by 23,000 in July—below the Dow Jones forecast of 83,000. Employment declined in local government, education and retail trade. Employment continued to trend up in health care.

In addition to weak numbers posted in June and July, the final count for May was revised down to 63,000–or 66,000 lower than the prior estimate. The revised numbers brought the 12-month average down to just 34,000.

According to the U.S. Bureau of Labor Statistics, the unemployment rate and number of unemployed persons dropped to 4.1% and 6.9 million, respectively. The labor force participation rate held steady at 61.4%, with long-term unemployment accounting for 25.5%.

Moreover, average hourly earnings increased by just two cents, bringing the 12-month average down to 3.2%—below the forecast increase of 3.5% and the lowest since May 2021.

For Nicole Bachaud, a labor economist at ZipRecruiter, the July employment report communicated that the labor market is “not out of the woods quite yet.”

On the contrary, according to Jeffrey Roach, chief economist for LPL Financial, “the labor market is experiencing an orderly slowdown, and labor stress indicators remain historically low.”

He notes that the July report is likely to boost the risk appetite of investors, but the decline in the unemployment rate will complicate the Fed’s decision process.

“The economy appears to be at full employment. But the broad slowdown in hiring will add support for those arguing to keep rates unchanged at next month’s Fed meeting,” he says.

By Demographic

This month, unemployment among the major worker groups: adult women – 3.7%; adult men – 3.9%; teenagers – 12.1%; Asians – 4%; Whites – 3.6%; Hispanics – 4.6%; and Blacks – 6.3%.

Last month, unemployment among the major worker groups: adult women – 3.7%; adult men – 3.9%; teenagers – 14.6%; Asians – 3.9%; Whites – 3.7%; Hispanics – 5.2%; and Blacks – 6.6%.

Image Source: A-36. Unemployed persons by age, sex, race, Hispanic or Latino ethnicity, marital status, and duration of unemployment (bls.gov)

By Industry

The Conference Board Employment Trends Index (ETI) increased to 107.71 in July, from an upwardly revised reading of 106.74 in June.

“The ETI rebounded in July after declining in May and June, suggesting continued resilience in the labor market, despite the ‘low-hire, low-fire’ backdrop,” says Conrad Qi, economic data scientist associate at The Conference Board. “Nonetheless, the ETI remains only 0.6% above its level one year ago, suggesting that payroll growth may remain modest in the months ahead.”

“Setting aside numerous special factors that caused hiring volatility this year—including seasonal education worker cuts and normalizing leisure and hospitality hiring after the FIFA World Cup, which lowered non-farm payrolls by 23,000 in July—underlying job growth remains modest but positive,” he continues.

Two of the ETI’s eight components contributed negatively to the index in July: Ratio of Involuntarily Part-time to All Part-time Workers and Industrial Production. The following six components contributed positively:

Percentage of Firms with Positions Not Able to Fill Right Now, Initial Claims for Unemployment Insurance, Job Openings, Real Manufacturing and Trade Sales, Percentage of Respondents Who Say They Find ‘Jobs Hard to Get’ and Number of Employees Hired by the Temporary-Help Industry.

“Positive contributions to the ETI were led by the share of small firms reporting that jobs are ‘not able to be filled right now’ and initial claims for unemployment insurance. The small firm measure rose four percentage points to 36% in July from 32% in June, its highest level since June 2025—an indication that small businesses are seeking to hire more people,” Qi says.

“Initial claims for unemployment insurance—the second-largest positive contributor—fell in July compared to June, to its lowest level since September 2022. Lower initial claims indicate that layoffs remain limited,” he continues.

Other positive contributions included job openings, which were estimated to have increased by 168,000 to 7.53 million, and real manufacturing and trade sales, which were estimated to have increased by 0.2%. The share of consumers who reported “jobs are hard to get”—an ETI component from the Consumer Confidence Survey—declined to 21.5% in July from 21.7% in June. Employment in the temporary help services industry increased by 3,400 in July.

The eight leading indicators of employment aggregated into the Employment Trends Index include:

Percentage of Respondents Who Say They Find “Jobs Hard to Get” (The Conference Board Consumer Confidence Survey)
Initial Claims for Unemployment Insurance (U.S. Department of Labor)
Percentage of Firms with Positions Not Able to Fill Right Now (© National Federation of Independent Business Research Foundation)
Number of Employees Hired by the Temporary-Help Industry (U.S. Bureau of Labor Statistics)
Ratio of Involuntarily Part-time to All Part-time Workers (BLS)
Job Openings (BLS)
Industrial Production (Federal Reserve Board)
Real Manufacturing and Trade Sales (U.S. Bureau of Economic Analysis)

The Employment Trends Index is a leading composite index for payroll employment. When the Index increases, employment is likely to grow as well, and vice versa. Turning points in the Index indicate that a change in the trend of job gains or losses is about to occur in the coming months.