What Vacations Tell Us About the Economy

A customer buys a product in a shop

The labor market threw another curve ball in July when the Bureau of Labor Statistics report showed that 528,000 jobs were added in the month, defying every indicator that had pointed to a much more modest jobs report. While UKG expects that 528,000 figure to be revised downward over the next few months, we are seeing slight signs of relative strength for the month of August, too.

At a glance, August’s decline of -0.8% may not seem like a sign of strength, but when we put it into context of how August typically performs, a slightly different story begins to emerge. In fact, for the same period last year, workforce activity declined -2.4%. Declining workforce activity is very common in August as more people squeeze in vacations before summer winds down.

So, what does this August’s data tell us? Are fewer people taking vacations? Or are more people being hired? It’s certainly a bit of both. Will that equate to another big upside surprise like we experienced in July? Probably not. However, the soft landing in the labor market is still firmly in place. Despite significant economic headwinds, our data indicated that job growth remained steady in August for the sixth month in a row, with very slight weakening month-to-month.

Despite significant economic headwinds, our data indicated that job growth remained steady in August for the sixth month in a row, with very slight weakening month-to-month.

Here’s a look at preliminary analysis from UKG data, which provides one of the earliest looks at business performance each month:

  • The services and distribution sector saw the largest decline, with a -1.6% dip. On the flip side, healthcare held relatively flat, managing to avoid significant declines for the first time since March.
  • Manufacturing turned negative following positive growth in June and July. Separate research from UKG has found that U.S. manufacturers have appropriate staffing levels just 11 days per month. The report found 4 in 5 currently have difficulty keeping up with production demands due to increased supply constraints and ongoing labor shortages. As this industry ramps up for the holiday production season, it’s possible we could see domestically produced inventory lacking on retailers’ shelves come November and December.
  • The UKG Workforce Recovery Index increased 2.1 percentage points, from 95.5% to 97.6%. This is the first month-over-month improvement since January/February 2022, with workforce activity still 2.4% below the levels seen in August 2021.

UKG will publish its complete August report on Tuesday, August 30th. Register to attend the UKG Live Market Briefing, which will take place that same day at 10 a.m. ET. The briefing will delve into our analysis for the month, expectations for the August jobs report, and provide a first look at how the latter-half of August is performing.

For organizations grappling with their peoples’ economic anxiety, register to attend a special UKG virtual event that will explore the impact of flexible working arrangements and scheduling, financial wellness and pay transparency, and evolving benefits to help calm concerns, taking place September 14 at 2 p.m. ET.

Each month, UKG releases its Workforce Activity Report. This next report will be the 47th published by UKG on the state of the economy since April 2020. At the onset of the pandemic, UKG began publishing this high frequency index, which analyzes the actual number of shifts being worked by 4 million people on a week-by-week basis, to provide a near real-time view of employment trends. The goal is to provide policymakers, business leaders, and economists with the most current information possible to guide decisions.