Economic Pulse: August 2023

Welcome to our monthly economic analysis, recapping the prior month’s performance. This report zeroes in on pivotal metrics: the unemployment rate, non-farm payrolls, and the inflation rate. We’ll also periodically dissect the GDP growth rate on a quarterly basis as data emerges.

In August, the economic backdrop was shaped by enduring high interest rates, volatility tied to China’s economic trajectory, a notable pivot by BRICS nations away from the dollar in trade, and the persistent Ukraine conflict. These dynamics underscore a broader global trend: a decelerating economic pace felt across numerous nations. With a close read of primary indicators like unemployment and inflation, we’ll unpack the month’s economic narrative. Dive in for a granular look at the numbers and their implications.


• Unemployment Rate: 3.8% (+0.3%)

• Inflation Rate: 3.7% (+0.5%)

• Interest Rate: 5.5% (=)

• Business Confidence Index: 47.6 (+1.2)

  • Unemployment Rate

The unemployment figures in August stood at 3.8% or approximately 6.62 million individuals, indicating a rise compared to the preceding month of July (3.5%, 6.37 million individuals).

The US economy added 187,000 jobs in August 2023, compared to the downwardly revised 157,000 in July and more than market expectations of 170,000. Still, it was the third consecutive month with job gains falling below the 200,000 threshold, indicating a gradual easing of labor market conditions, largely attributed to the Federal Reserve’s significant interest rate hikes aimed at cooling down inflation. Employment continued to trend up in health care (+71,000), leisure and hospitality (+40,000), social assistance (+26,000), and construction (+22,000). On the other hand, transportation and warehousing lost 34,000 jobs, as the bankruptcy of Yellow, a major trucking company, left about 30,000 workers without jobs. Information employment changed little (-15,000), with employment in motion picture and sound recording industries decreasing by 17,000, reflecting the absence of striking Hollywood actors, who are not counted as employed. 

  •  Inflation Rate 

This month, the inflation rate was measured at 3.7%. This figure marks an increase compared to the last month (3.2%).

The annual inflation rate in the US accelerated for a second straight month to 3.7% in August from 3.2% in July, above market forecasts of 3.6%. Oil prices have been on the rise in the previous two months, which coupled with base effects from last year, pushed the inflation higher. In July 2023, energy cost fell 3.6%, much less than a 12.5% drop in July, with prices declining at a smaller pace for fuel oil (-14.8% vs -26.5%) and gasoline (-3.3% vs -19.9%). Also, cost of transportation services (10.3% vs 9%) increased more. On the other hand, inflation slowed for electricity prices (2.1% vs 3%), food (4.3% vs 4.9%), shelter (7.3% vs 7.7%), new vehicles (2.9% vs 3.5%) and apparel (3.1% vs 3.2%). Also, faster decreases were seen in cost for utility gas service (-16.5% vs -13.7%), medical services (-2.1% vs -1.5%) and used cars and trucks (-6.6% vs -5.6%). Core inflation rate however, which excludes food and energy, slowed for the fifth month to 4.3%, in line with market expectations.

  •  Interest Rate 

This month, the interest rate remained steady at 5.5%, halting the previous trend of continuous increases and matching last month’s figure (5.5%).

​​The Federal Reserve kept the target range for the federal funds rate at a 22-year high of 5.25%-5.5% in its September 2023 meeting, following a 25 bps hike in July, and in line with market expectations, but signaled there could be another hike this year. Projections released in the dot-plot showed the likelihood of one more increase this year, then two cuts in 2024. Policymakers now see the fed funds rate at 5.6% this year, the same as in the June projection, while it is seen higher at 5.1% in 2024, compared to 4.6% seen in June. Meanwhile, GDP growth is seen higher in 2023 (2.1% vs 1% seen in June) and 2024 (1.5% vs 1.1%). PCE inflation was also revised slightly higher to 3.3% this year (vs 3.2%) but was kept at 2.5% for 2024. The core rate is expected lower in 2023 (3.7% vs 3.9%) but was left unchanged for 2024 (at 2.6%). The unemployment rate is projected lower at 3.8% (vs 4.1%) in 2023 and 4.1% (vs 4.5%) in 2024.

  •  Business Confidence Index

This month, the Business Confidence Index was measured at 47.6. This figure marks an increase compared to the last month (46.4).

The ISM Manufacturing PMI climbed to 47.6 in August 2023 from the previous month’s 46.4, slightly exceeding the market consensus of 47.0. However, this reading still indicated that economic activity within the manufacturing sector had contracted for the tenth consecutive month. While production levels stabilized, the inflow of new orders experienced a more rapid decline, and the pace of job shedding showed signs of easing. On the cost front, factory input prices remained subdued, but showed signs of reversing, as the survey’s measure of prices paid by manufacturers rose to 48.4 last month from 42.6 in July. The PMI has consistently remained below the 50 threshold since last November, signifying a prolonged period of contraction in the manufacturing sector, which is the most extended stretch of its kind since the Great Recession of 2007-2009. 


As we conclude our economic analysis for August, it’s clear that the economy remains robust even as unemployment and inflation rise. The interplay of various factors, such as high interest rates and uncertainties stemming from China’s economic deceleration, suggest potential headwinds for the US. Nevertheless, it’s noteworthy that for over a year, experts have consistently predicted a recession that has yet to materialize. In our next update, we’ll introduce the GDP indicator as the third quarter draws to a close. This will allow us to compare Q3’s performance to Q2 and evaluate the GDP growth rate. Stay with us for a deeper dive into the unfolding economic developments in our upcoming analysis.

All insights and numbers from: US Bureau of Labor Statistics.

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