The U.S. economy added more jobs than expected in August, but a rise in the unemployment rate to 3.8 per cent and moderation in wage growth pointed to an easing in labor market conditions, which could bolster expectations that the Federal Reserve will not raise interest rates this month.
Nonfarm payrolls increased by 187,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for July was revised lower to show 157,000 jobs added instead of the previously reported 187,000.
The economy needs to create roughly 100,000 jobs per month to keep up with the increase in the working age population.
Economists polled by Reuters had forecast nonfarm payrolls increasing by 170,000 jobs last month. Striking Hollywood actors and the bankruptcy of a major trucking company had led economists to anticipate slower job growth in August.
A tendency for the initial payrolls count to be weaker in August before being subsequently revised higher in September and October, also factored into economists’ expectations.
The Labor Department’s Bureau of Labor Statistics, which compiles the employment report, had reported that there were almost 18,000 workers on strike during the period it gathered data for August’s report, including 16,000 Screen Actors Guild-American Federation of Television and Radio Artists members.
Yellow Corp trucking filed for Chapter 11 bankruptcy in early August, leaving about 30,000 workers unemployed.
Though demand for labor is slowing, some services businesses like restaurants, bars and hotels remain desperate for workers. Job openings dropped to the lowest level in nearly 2-1/2 years in July, the government reported this week.
The unemployment rate increased to 3.8 per cent as more people entered the labor force, from 3.5 per cent in July. It remains below the U.S. central bank’s latest median estimate of 4.1 per cent by the fourth quarter of this year.
Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25 per cent -5.50 per cent range.
Before the report, financial markets were expecting the central bank to leave its benchmark overnight interest rate unchanged at its Sept. 19-20 policy meeting, according to the CME Group’s FedWatch Tool.
With the labor market loosening, wage growth slowed somewhat. Average hourly earnings rose 0.2 per cent after increasing 0.4 per cent in July. In the 12 months through August, wages advanced 4.3 per cent after increasing 4.4 per cent in July.
“The US jobs market has continued its hot streak.. above expectations and somewhat vindicating the Federal Reserve’s hawkish stance”, said Richard Carter, head of fixed interest research at Quilter Cheviot. “At Jackson Hole last week, Jerome Powell made it clear to the market that it shouldn’t expect cuts anytime soon, and with the economy still holding up its end of the bargain, the soft landing the Fed craves so much is within sight.”
“However, it is clear that the pace of labour market growth is beginning to slow, and with previous months’ reports being revised down and the unemployment rate ticking up to its highest level in over 18 months, it is perhaps indicative that we are at or near the end of the rate hiking cycle.”
Reuters – Lucia Mutikan