The latest US job data showed a labor market undergoing a controlled cooling, illustrated by solid hiring, slower earnings growth and more people returning to the workforce.
(Bloomberg) — The latest US job data showed a labor market undergoing a controlled cooling, illustrated by solid hiring, slower earnings growth and more people returning to the workforce.
Employers in August added 187,000 jobs in a broad-based advance, following downward revisions to payrolls in the prior two months, government figures showed Friday. Hundreds of thousands more joined the labor force, though a growing number was unable to find work right away.
Combined with wage growth running at the slowest pace since early last year, the data illustrate why Americans are a little less upbeat about the job market. While hiring and incomes are still firm enough to bolster consumer spending, job openings have retreated and layoffs are picking up.
The moderation gives the Federal Reserve room to pause interest-rate increases this month while keeping options open for another hike later in the year. Traders continued to see the Fed holding steady in September.
“The labor market was sprinting last year and now it’s getting closer to a marathon pace,” Nick Bunker, head of economic research at the Indeed Hiring Lab, said in a note. “A slowdown is welcome; it’s the only way to go the distance.”
Combined with inflation that’s now rising only modestly, the data support growing calls that the Fed can successfully tame price pressures without putting millions of people out of work.
“It’s not yet the 2019 labor market, but it’s darn close to it,” said Gregory Daco, chief economist at EY. “We’re not seeing any worrisome signs that would indicate a recession is around the corner.”
Job gains were probably less robust in the past year as well, according to preliminary estimates issued by the Bureau of Labor Statistics last week. Still, the figures point to a steady cooling rather than an outright collapse.
“The labor market overall is continuing to soar at an ideal cruising altitude — high enough to keep the unemployment rate low while creating more opportunities for workers to come in off the sidelines, but low enough so as not to cause a resurgence of inflation,” said ZipRecruiter Chief Economist Julia Pollak.
The unemployment rate climbed to 3.8%, the highest since early last year, though it largely reflected workers coming off the sidelines. The overall participation rate — the share of the population that is working or looking for work — rose for the first time since March to 62.8%, the highest since February 2020.
What Bloomberg Economics Says…
“Belying the upside surprise in the August payrolls print are weaknesses that suggest the should Fed pause its rate-hike cycle. Hourly wage growth slowed notably, labor-force participation increased — most notably for older workers and prime working-age women — and past prints were once again revised downward.”
— Stuart Paul and Eliza Winger
To read the full note, click here
The August advance in payrolls was broad, led by gains in health care, leisure and hospitality, and construction. Manufacturing payrolls increased by the most since October and reflected more hiring at producers of machinery and fabricated metals.
Job growth would have been even stronger if not for strikes by Hollywood workers and the bankruptcy of trucking firm Yellow Corp. Looking ahead, a potential strike by the United Auto Workers and a possible government shutdown could also weigh on payrolls in the coming months.
Read more: Strikes in US at Decades High Predict More Industries at Risk
Other firms are letting go of staff altogether. A measure of planned layoffs surged to a three-month high in August as companies like T-Mobile US Inc. and Charles Schwab Corp. announced fresh payroll cuts.
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