Institution Employment Report by BoA: Cooling Labor and Rising Lower Income

The Institute Employment Report, August 2026, from the Bank of America Institute shows that the labor market is cooling a little, although it remains relatively healthy overall.

Payroll growth was 1.5% in August, down from 1.8% in July. At the same time, lower-income households saw after-tax wage growth of 4.7%. This is important because we need lower-income wages to rise substantially.

There are ways to improve this, but it would require a broader discussion about how jobs are created, in-house training, education, and changes to policies and rules that could help maximize employment. We could go down a rabbit hole discussing how to help people enter the labor force and move progressively upward, but that would require a much larger conversation. It's a human capital discussion...one we sort of haven't solved yet. 

Another interesting finding is that the previous K-shaped pattern in wage growth has reversed. Job switching has also increased, and workers who change jobs are apparently receiving larger pay increases. The pay increase associated with a job change reached 12.5% in July.

Overall, this is a pretty good report. There are some risks and signs of cooling, but the labor market remains relatively healthy, and the improvement in wage growth among lower-income workers is encouraging.

U.S. Labor Market Momentum Cools in August, While Lower-Income Wage Growth Improves

• Payroll growth slowed to 1.5% year-over-year in August, down from 1.8% in July.
• The labor market remained relatively healthy, despite slower growth.
• Unemployment payments showed little year-over-year change.
• Lower-income households saw after-tax wage growth of 4.7%.
• Higher-income households saw after-tax wage growth of 3.5%.
• This reversed the previous “K-shaped” wage-growth pattern.
• Job switching increased in July, especially among weekly-paid workers.
• Weekly-paid workers, often hourly employees, saw the largest increase in job changes.
• The average pay increase associated with changing jobs reached 12.5%, the highest level in more than three years.
• Rising job mobility and larger pay increases for lower-income workers may be helping narrow wage-growth differences.
• The report cautions that Bank of America’s data is based on selected, aggregated customer information and has limitations.

Bank of America Institute. (2026, September 3). The Institute employment report: August 2026. Bank of America. https://institute.bankofamerica.com/economic-insights/monthly-employment-report-august-2026.html