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| Photo Credit: AP. |
WASHINGTON (AP) — America’s employers added a healthy number of jobs last month, yet slowed their hiring enough to potentially help the Federal Reserve in its fight to reduce raging inflation.
The economy
gained 315,000 jobs in August, a still-solid figure that pointed to an economy
that remains resilient despite rising interest rates, high inflation and
sluggish consumer spending. Friday’s report from the government also showed
that the unemployment rate rose to 3.7%, up from a half-century low of 3.5%.
Yet that increase was also an encouraging sign: It reflected a long-awaited
rise in the number of Americans who are looking for work.
“It’s a very
positive report and still holds open the possibility for a soft landing,” said
Ellen Gaske, an economist at PGIM Fixed Income, referring to the Fed’s goal of
slowing the economy enough to cool inflation without going so far as to cause a
recession.
Prices are
rising at nearly the fastest pace in 40 years, which has handed congressional
Republicans a hammer to use against Democrats in the fall congressional
elections. Texas Republican Rep. Kevin Brady noted Friday that rising wages
aren’t keeping up with inflation, leaving Americans with “shrinking paychecks.”
The White
House has pushed back, claiming credit for what it calls evidence that the
economy remains on firm footing.
“Jobs are
up, wages are up, people are back to work and we’re seeing some signs that
inflation may be, may be ... beginning to ease,” President Joe Biden said
Friday.
Inflation
did fall to an 8.5% annual rate in July from 9.1% in June, mostly as gas prices
steadily dropped. Prices at the pump fell to $3.81 a gallon Friday from a peak
of $5.02 in mid-June. But inflation has declined in the past only to jump
higher again, and few economists are willing to declare yet that it has peaked.
The August
hiring gain was down from 526,000 jobs that were added in July, and it fell
below the average increase of the previous three months. Wage growth weakened a
bit last month, too, which could also serve the Fed’s inflation fight. Average
hourly pay rose 0.3% from the previous month, the smallest gain since April.
Businesses typically pass the cost of higher wages on to their customers
through higher prices, thereby fueling inflation.
Gaske
suggested that the figures could allow the Fed to raise its benchmark
short-term interest rate by a half-percentage point at its next meeting later
this month, rather than by three-quarters of a point, as many Wall Street
traders and some economists have expected. Either size increase would exceed
the Fed’s typical hike of a quarter of a percentage point. When the Fed
increases its rate, it leads over time to higher rates on mortgages, auto loans
and business borrowing and can weaken the economy.
The Fed is
rapidly raising rates to try to cool the economy and reduce inflation. Some
economists fear, though, that the Fed is tightening credit so aggressively that
it will eventually tip the economy into recession.
Most
industries added workers last month, with the biggest increases in professional
and business services, which gained 68,000 jobs. That sector includes
architects, engineers and some tech workers. Health care added 61,500 jobs,
retailers 44,000.
Some
companies, particularly in technology, have announced layoffs in recent months.
On Wednesday, Snap, the parent company of the social media platform Snapchat,
said it would cut 20% of its staff. The fitness equipment maker Peloton, the
stock trading app Robinhood and the online furniture Wayfair have also said
they are laying off workers. Bed, Bath & Beyond says it will close 150
stores and slash its workforce by 20%.
Yet with
unemployment still very low and many businesses desperate to find workers,
people who have been laid off are still finding plentiful opportunities
elsewhere. One eager employer is TruBlue Total House Care, which does home
renovations and repairs, with a focus on making homes safer for senior
citizens.
Sean
Fitzgerald, president of TruBlue, based in Cincinnati, said all its 87 locations
have posted job openings. The number of people applying has risen recently, he
said — a welcome sign for a company that has been short-staffed since soon
after COVID-19 struck in the spring of 2020.
“We have far more demand than we do
employees,” Fitzgerald said. “Our biggest hurdle continues to be getting enough
qualified employees hired.”
To help
retain its workers, TruBlue in some cases is lending company vehicles to
employees and paying for gas.
Fitzgerald
said a slowdown in home building, one consequence of the Fed’s rate hikes, has
likely cost some construction workers their jobs, making it a bit easier for
his company to hire.
Becky
Frankiewicz, president of the staffing firm Manpower Group North America, said
that laid-off workers, particularly in technology, are being quickly rehired.
Software development, she said, is the second-most in-demand skill, behind
nursing. The job market is the “eye of the economic hurricane,” she said, with
hiring resilient despite the turmoil created by weaker growth and high
inflation.
But
Frankiewicz said she is starting to see some early signs that employers are
dialing back: Job postings at Manpower were down 6% in August from a month ago.
Wage growth has also started to plateau.
Mathieu
Stevenson, CEO of Snagajob, an hourly hiring platform, said his firm has also
seen a small decline in job postings, though hiring is still strong. Some
employers, after being short-staffed for so long, appear to have figured out
how to get by with fewer workers, he said — a trend that could slow future job
gains.
“People are
less panicked by the understaffing, because they’ve just gotten so accustomed
to operating with it,” Stevenson said. “And so they’re much less aggressive
about how hard they’re trying to hire.”
Recent data
has painted a somewhat conflicting picture of the economy. The broadest measure
of the economy’s output — gross domestic product — has shrunk for two straight
quarters, meeting one informal definition of a recession. Yet another measure,
focused on incomes, indicates the economy expanded in the first half of the
year, albeit slowly.
Fed Chair
Jerome Powell, in a high-profile speech last week, made clear that the central
bank was prepared to continue raising short-term interest rates and to keep
them elevated to keep fighting inflation. Powell warned that the Fed’s
inflation fight would likely cause pain for Americans in the form of a weaker
economy and job losses.
The Fed
chair also said the job market was “clearly out of balance,” with demand for
workers “substantially exceeding” the available supply. Friday’s jobs figures
and a report earlier this week that showed the number of job openings rose in
July suggest that the Fed’s rate hikes so far haven’t restored much balance.
There are
roughly two advertised job openings for every unemployed worker.