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August’s US Employment Data Suggests Diminished Rate of Job Additions Amid Slowing Economy

by Michael Nguyen
10 comments
U.S. labor market report

The U.S. labor market, previously overheated, is displaying signs of gradual normalization.

The Department of Labor is anticipated to announce this Friday that a total of 170,000 new jobs were created in August across various sectors — private companies, nonprofits, and government agencies, according to forecasts by analytics firm FactSet. This expected number signifies a decrease from the 187,000 jobs added in July and marks the smallest monthly increase since December of last year.

Becky Frankiewicz, the Chief Commercial Officer of ManpowerGroup, commented on the emerging trend, stating, “The labor market is transitioning toward a more temperate state. Although the demand is lessening, it is not plummeting.”

This moderation in job creation is likely to be favorably received by the Federal Reserve, which has been attempting to curb inflation through a series of 11 consecutive rate hikes. The central bank aims to engineer what is termed a “soft landing” — decelerating economic growth and employment to dampen inflation without thrusting the economy into recession. Such a feat has often been met with skepticism among economists.

However, optimism is increasing, with year-over-year inflation showing a consistent decline from a high of 9.1% in June 2022 to 3.2% in July. Despite experiencing pressure from escalating borrowing costs, the economy continues to grow at a reasonable pace. Gross Domestic Product (GDP) rose at an annualized rate of 2.1% from April to June, while consumer spending and business investments persisted.

The Federal Reserve aims for a slowdown in employment growth, as a robust labor market can exert upward pressure on wages, thereby contributing to inflationary trends.

To date, the reduction in the pace of hiring has been as unintrusive as possible, with layoffs being minimal. The unemployment rate for August is projected to remain at 3.5%, scarcely above a half-century low. Furthermore, recent data from the Labor Department indicates a consecutive three-week drop in applications for unemployment benefits, confirming the reluctance among employers to sever ties with existing staff.

Rather than reducing their workforce, companies have been cutting back on job openings, posting 8.8 million in July, the lowest since March 2021. Additionally, employees are less inclined to leave their current roles in pursuit of improved compensation and benefits: 3.5 million individuals quit their jobs in July, the lowest number since February 2021. Such a trend alleviates the need for companies to raise wages to retain or attract talent.

The growth rate of average hourly earnings has also cooled, with a projected year-over-year increase of 4.4% in August, in line with July’s figures. Nancy Vanden Houten, Lead U.S. Economist at Oxford Economics, noted that a consistent annual wage growth of around 3.5% would align with the Federal Reserve’s 2% inflation target.

In light of these developments, financial market analysts are increasingly of the view that the Federal Reserve may cease its rate-hiking policy. A recent survey by the CME Group revealed that almost 90% of analysts expect rates to remain unchanged in the upcoming Federal Reserve meeting scheduled for September 19-20.

However, the upcoming jobs report may face complicating factors. The commencement of the new school year may distort seasonal hiring statistics as educators abandon temporary summer employment to return to full-time teaching. Moreover, the closure of significant trucking firm Yellow and strikes by Hollywood writers and actors are believed to have restricted job growth for the month of August.

Frequently Asked Questions (FAQs) about August U.S. Jobs Report

What is the main focus of the article?

The article primarily focuses on the U.S. jobs report for August, examining a reduced rate of job creation and its implications for the broader economy. It also discusses how this slowdown is perceived by the Federal Reserve and its ongoing efforts to curb inflation through interest rate hikes.

How many new jobs were expected to be added in August according to the Department of Labor?

The Department of Labor is expected to report that 170,000 new jobs were added in August across various sectors such as private companies, nonprofits, and government agencies.

What is the Federal Reserve’s perspective on the slowing job growth?

The Federal Reserve views the slowing job growth favorably, as it has been attempting to tame inflation through a series of interest rate hikes. The central bank aims for a “soft landing,” where economic growth and employment slow down enough to reduce inflation but not lead to a recession.

How has inflation been trending?

Since reaching a peak of 9.1% in June 2022, year-over-year inflation has been on a decline and was recorded at 3.2% in July.

What do market analysts predict about the Federal Reserve’s future rate policies?

A recent survey by the CME Group revealed that nearly 90% of analysts expect the Federal Reserve to leave interest rates unchanged at its next meeting, scheduled for September 19-20.

How has wage growth been affected?

The pace of wage growth has moderated. The year-over-year increase in average hourly earnings was projected to be 4.4% in August, in line with July’s figures.

What complicating factors could affect the August jobs report?

The report may be influenced by the commencement of the new school year, which can distort seasonal hiring statistics. Additionally, the closure of significant trucking firm Yellow and strikes by Hollywood writers and actors are believed to have limited job growth for August.

More about August U.S. Jobs Report

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10 comments

SteveM September 1, 2023 - 10:36 am

Wage growth slowing down isn’t good for us common folks. Hope the fed knows what its doin.

Reply
MarkD September 1, 2023 - 2:14 pm

When’s the next Fed meeting again? gotta keep an eye on those interest rates.

Reply
Rachel_L September 1, 2023 - 3:30 pm

Great article, really detailed. But what about international factors? the world economy is interconnected after all.

Reply
Sarah K. September 1, 2023 - 4:00 pm

interesting take on the Fed’s soft landing attempt. Always skeptical about that. But if inflation is really dropping, who knows?

Reply
Anna_W September 1, 2023 - 4:18 pm

Loved the article. Gives a pretty comprehensive view. But yea, whats the deal with strikes affecting job growth, aren’t those temp?

Reply
Tom G September 1, 2023 - 6:18 pm

So we’re just ignoring the impact of seasonal jobs? teachers going back to school must skew the numbers somewhat.

Reply
GregH September 1, 2023 - 7:58 pm

Almost 90% of analysts think the Fed’s done raising rates huh? would be nice if they’re right, tired of these hikes.

Reply
Emily92 September 1, 2023 - 8:00 pm

Can someone explain why a decrease in job openings is a good thing? aren’t companies supposed to be expanding?

Reply
Mike Johnson September 2, 2023 - 2:24 am

Wow, didn’t expect to see job growth slowing down like this. But I guess it’s better than a free fall, right?

Reply
VickyS September 2, 2023 - 4:14 am

Articles like this make economics seem less boring, lol. Kudos!

Reply

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