US job growth is strong in August. Labor market pressure has begun to ease

  • Nonfarm payrolls increased 315,000 in August
  • The unemployment rate rose to 3.7% from 3.5% in July
  • average hourly earnings earn 0.3%; 5.2% year-over-year increase
  • Average weekly working hours decreased to 34.5 hours from 34.6 hours

WASHINGTON, Sept. 2 (Reuters) – U.S. employers hired more workers than expected in August, but moderate wage growth and a rise in the unemployment rate to 3.7% suggest the labor market is beginning to weaken, prompting cautious optimism that the potential Fed slowdown. economy without causing a recession.

Friday’s closely watched Labor Department employment report, which also showed 107,000 fewer jobs were created in June and July than initially expected, did not resolve the debate over whether the US central bank would provide a third 75 basis points or a half. percent. Point price hike at its policy meeting this month.

The increase in the unemployment rate to a six-month high came as nearly 800,000 people entered the labor market, pushing the size of the labor force to a record high. The labor market remains strong, confirming the economy’s resilience despite the contraction of GDP in the first half of 2022.

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“The increase in employment provides another refutation of the notion that the economy is already in a recession,” said Michael Feroli, chief US economist at JPMorgan in New York. “The report maintains hope that a soft landing is still possible.”

The Enterprise Survey showed nonfarm payrolls increased by 315,000 jobs last month, after rising 526,000 in July. August saw the 20th consecutive month of job growth. Employment is now 240,000 jobs above its pre-epidemic level.

Economists polled by Reuters had expected a job increase of 300,000, with estimates ranging from 75,000 to 450,000.

Some economists cautioned against over-reading August’s slowdown in job growth, noting that the response rate to last month’s enterprise survey was the lowest since 2006. Response rates were historically lower in August because this is the time most Americans take their summer vacation.

There was a trend to revise the initial August payroll numbers significantly higher.

“Over the past five years, the upward revision between the first and third estimates has averaged nearly 120,000,” said Ryan Sweet, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “So, August job growth may be stronger than it appears at first glance.”

The professional and business services industry led the sharp increase in employment last month, adding 68,000 jobs. Healthcare payroll increased by 48,000 jobs.

Employment in the retail sector increased by 44,000 jobs, while manufacturing added 22,000 jobs. Employment in the construction sector increased by 16,000 jobs.

Leisure and hospitality salaries increased by 31,000, a decline from the average of 90,000 per month in the first seven months of the year. Employment in the leisure and hospitality industry remains 1.2 million below the pre-pandemic level.

non-farm jobs

Federal Reserve Chairman Jerome Powell warned Americans last week of a painful period of slowing economic growth and the potential for higher unemployment as the central bank aggressively tightens monetary policy to suppress inflation.

The Fed raised its policy rate twice by three-quarters of a percentage point, in June and July. Since March, it has raised that rate from close to zero to its current range of 2.25% to 2.50%. Financial markets are pricing in a roughly 58.0% probability of a 75 basis point increase at the September 20-21 federal policy meeting, according to CME’s FedWatch Tool. That’s down 70% before the employment report was released.

Consumer price data for August ending in the middle of the month will be a key factor in determining the magnitude of the next rate increase.

Stocks on Wall Street were trading higher. The dollar fell against a basket of currencies. US Treasury bond prices rose.

high work force

While the unemployment rate rose to 3.7% from its pre-pandemic low of 3.5% in July, that was due to 786,000 people entering the workforce. The biggest increase since January has pushed the size of the workforce to an all-time high, surpassing the previous record set in December 2019.

As a result, the labor force participation rate, or the proportion of working-age Americans who have a job or are looking for a job, rose to 62.4% from 62.1% in July. It is still one percentage point below the pre-pandemic level.

Participation in the labor market

The increased labor pool, if it continues, will help narrow the gap between supply and demand for workers. There were 11.2 million vacancies on the last day of July, with two jobs opened for every unemployed person.

“This is a pressure release valve that can help the Fed accomplish its mission of lowering inflation and making a smooth landing,” said Yong Yu Ma, senior investment analyst at BMO Wealth Management in Dallas.

But some economists are skeptical that the employment pool will continue to expand, noting that the August increase was driven by seasonal factors as well as increased worker participation in adulthood.

The participation rate for this group is now higher than the 2019 average.

“We expect the downward trend in the unemployment rate to resume in September,” said Conrad de Cuadros, chief economic adviser at Brian Capital in New York.

Wage growth slowed, with average hourly earnings rising 0.3% after a 0.5% increase in July. That left the annual wage increase at 5.2% in August. Strong wage gains keep the income side of the ledger of economic growth expanding, albeit at a moderate pace, and the recession is currently in a stalemate.

The average workweek fell to 34.5 hours from 34.6 hours in July, a possible sign that businesses are beginning to reduce working hours due to economic uncertainty.

The number of economic part-time workers rose to 4.1 million from 3.9 million in July.

underemployment

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(Reporting by Lucia Mutikani) Editing by Chizu Nomiyama and Andrea Ricci

Our Standards: Thomson Reuters Trust Principles.

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