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| Photo Credit: AP. |
WASHINGTON (AP) — The nation’s job market last month delivered what the Federal Reserve and nervous investors had been hoping for: A Goldilocks-style hiring report.
Job growth
was solid — not too hot, not too cold. And more Americans began looking for
work, which could ease worker shortages over time and defuse some of the
inflationary pressures that the Fed has made its No. 1 mission.
Employers
added 315,000 jobs, roughly what economists had expected, down from an average
487,000 a month over the past year. The unemployment rate reached 3.7%, its
highest level since February. But it rose for a healthy reason: Hundreds of
thousands of people returned to the job market, and some didn’t find work right
away, which boosted the government’s count of unemployed people.
The American
economy has been a puzzle this year. Economic growth fell the first half of
2022, which, by some informal definitions, signals a recession.
But the job
market is still surprisingly robust. Businesses remain desperate to find
workers. They’ve posted more than 11 million job openings, meaning there are
nearly two job vacancies, on average, for every unemployed American.
And
inflation, which began to accelerate alarmingly in the spring of last year,
remains close to a 40-year high. That’s a sign that consumers’ appetite for
goods and services is still strong enough to allow businesses to raise prices.
The
relentless rise in consumer prices has forced the Fed to raise interest rates
aggressively to try to slow hiring and wage increases and drive down inflation.
It’s aiming to pull off a so-called soft landing — raising borrowing costs
enough to slow growth and curb inflation without tipping the United States into
a recession.
So far, so good.
“Today’s
report answers the persistent recession question, at least for today: We are
not in a recession,” said AnnElizabeth Konkel, senior economist at the Indeed
Hiring Lab. “The U.S. labor market remains strong with employers adding jobs
and labor supply coming back online... The sun is still shining on the U.S.
labor market.’’
Here are
five takeaways from the August jobs report:
MAKING THE FED’S TASK EASIER
Friday’s report from the government suggests that the Fed may find it a little easier to bring the economy in for a soft landing. Key to that daunting task is seeing hiring ease a bit — enough, anyway, to reduce the pressure on employers to raise pay. When they hand out raises, businesses typically increase prices for their customers to offset their higher labor costs, thereby feeding inflation.
Not only did
August’s job creation decelerate from July’s breakneck pace — 526,000 added
jobs — but the Labor Department also revised down its earlier estimate of the
gains for June and July by a combined 107,000. In addition, average hourly pay
rose just 0.3% last month from July, the lowest month-to-month gain since
April.
“If the Fed
were to design the (jobs) report, this is the kind of report they would have
designed,” said Megan Greene, chief economist at the Kroll Institute.
Fed Chair
Jerome Powell has made it clear — notably at a hawkish speech last week in
Jackson Hole, Wyoming — that the central bank expects to impose further large
rate hikes to try to tame inflation. And he warned that the Fed’s continued
tightening of credit will cause pain for many households and businesses as it
slows the economy and potentially lead to job losses. The Fed has raised its
benchmark short-term interest rate four times this year, including by a hefty
three-quarters of a percentage point in both June and July.
Investors
are anxiously anticipating what the Fed will do when it next meets Sept. 20-21.
“The slower
pace of payroll gains in August, together with a big rebound in the labor
force, and the more modest increase in wages, would seem to favor a smaller
(half-point) rate hike from the Fed,” said Michael Pearce, senior U.S. economist
at Capital Economics.
Still, Fed
policymakers will be watching to see whether inflation decelerated last month.
One major barometer will be the government’s report on consumer prices for
August, to be issued Sept. 13.
HUH? HIGHER UNEMPLOYMENT IS GOOD NEWS?
Normally, an
uptick the joblessness would be sobering news, even cause for worry. Not now.
The
unemployment rate rose last month to 3.7% from 3.5%, which had tied a 50-year
low. But the increase in August was welcome: The number of Americans either
working or looking for work surged by 786,000 in August, the biggest one-month
jump since January. And their share of the population — the so-called labor
force participation rate — rose to 62.4% last month, its highest level since
March.
To be
counted as unemployed, people have to be actively seeking a job. So when they
stay on the sidelines, as many have since COVID-19 struck, their absence from
the labor force means they don’t show up as unemployed. And the jobless rate
can look artificially low.
Last month,
the number of Americans who told the Labor Department they had jobs rose by
442,000. And the number who said they were unemployed also rose, by 344,000.
That suggests that many people who started looking for a job didn’t find one
right away.
“The labor participation rate went up, and I would love to see that number continue to climb even if that means a 3.7%, 3.8%, 3.9% unemployment rate,” said Labor Secretary Marty Walsh. “You have potentially 11 million open jobs. Having more people entering the workforce is good for the economy.’’
The idea is
that the more Americans there are who are looking for work, the less pressure
there is on employers to raise wages to attract applicants, increase prices and
contribute to inflation.
BROAD JOB GAINS
Last month’s
jobs gains were spread broadly across industries. Retailers added 44,000.
Healthcare gained 48,000, including nearly 15,000 at hospitals.
Factories
added 22,000 jobs despite a slowing global economy, a consumer shift away from
manufactured goods and toward services like restaurant meals and a stronger
dollar that makes U.S.-made goods pricier overseas.
But hiring
in leisure and hospitality slowed sharply in August — to 31,000, including just
18,000 at bars and restaurants. Both gains were the weakest since December
2020.
The average
workweek slipped slightly last month to 34.5 hours. Those figures haven’t
changed much this year even as employers have complained about a worker
shortage.
So why
aren’t they assigning more hours to the workers they have on hand?
Labor
Secretary Walsh suspects that employees, especially in high-paying occupations,
are more conscious of striking a balance between their work and their personal
lives and balk at putting in ever more hours on the job. Employers are wary,
having seen “people quitting their jobs because their work-life balance was
off,” Walsh suggested.
An increase
in employees working from home, or splitting time between home and the
workplace, may also limit the number of hours worked.
In the
leisure and hospitality business, which includes restaurants and hotels,
average hours worked peaked in April 2021 and has fallen more or less steadily
since then. Thomas Feltmate, senior economist at TD Economics, said the drop
might reflect a “softening in consumer demand in recent months for discretionary
recreational services.”
BLACK UNEMPLOYMENT
An increase
in the unemployment rate of Black Americans last month couldn’t be explained by
an influx into the labor force.
The number
of Black people working or looking for work fell by 51,000. And their labor
participation rate dipped from 62% in July to 61.8% last month, the lowest
point since December. The number of Black Americans reporting that they had
jobs fell by 131,000 last month. And the number saying they were unemployed
rose by 79,000.The Black jobless rate rose from 6% in July to 6.4% in August,
the highest level since February.