The Federal Reserve is expected to refrain from raising rates during its upcoming two-day meeting this month, following a positive set of job figures for August on Friday – showing a Goldilocks-like balance between not being too hot or too cold.
The data revealed that the American economy added 187,000 new jobs in August. However, it also brought a surprising uptick in the jobless rate, a slowdown in wage growth, and downward revisions in job numbers for both June and July.
August's job growth represented an improvement from July's revised increase of 157,000 jobs, which had been reduced by 30,000 from the initial estimate of 187,000.
Over the three-month span from June to August, the economy generated 449,000 jobs, the lowest such three-month total in three years. Additionally, the Bureau of Labor Statistics revised the gains for June and July down by a combined 110,000, marking an 80,000 cut for June to a much lower 129,000 from the original estimate of 209,000.
The health care industry saw the most substantial hiring increase, adding 97,000 jobs last month, which is relatively immune to economic fluctuations. Construction companies added 22,000 jobs, factories added 16,000, and bars and restaurants contributed nearly 15,000 jobs.
Conversely, trucking companies shed 37,000 jobs due to the closure of the Yellow trucking firm. Music and movie companies also lost 17,000 jobs, a decline attributed by the Labor Department to Hollywood actors and writers being on strike.
Economists contend that accounting for these specific impacts, the new job numbers would have easily exceeded 200,000, marking a solid outcome and slightly stronger than projected.
The Labor Department's report from Friday also indicated that the unemployment rate climbed from 3.5% to 3.8%, the highest level since February 2022, albeit remaining low compared to historical standards.
However, the rise in the unemployment rate was for an encouraging reason: A significant number of individuals, 736,000 to be precise, initiated job searches last month, the largest such increase since January. Not all of them found employment immediately, as only actively job-seeking individuals are counted as unemployed.
Moreover, the proportion of Americans either employed or actively seeking employment reached 62.8% in August, marking the highest level since February 2020, before the impact of COVID-19 on the U.S. economy – both positive developments.
The jobs report from Friday also indicated a slowdown in wage growth, which could provide reassurance that inflation pressures are subsiding. Average hourly pay increased by 0.2% from July to August, the smallest gain in a year and a half. When measured year-over-year, wages for August were up 4.3%, slightly below the 4.4% increases observed in both July and June.
Andrew Hunter of Capital Economics noted, "The 187,000 gain in non-farm payrolls, the uptick in the unemployment rate, and the deceleration in wage growth in August all contribute to the evidence that labor market conditions are approaching pre-pandemic norms."
