By Andrew Moran
The U.S. labor market could be showing signs of slowing down after the economy added 315,000 new jobs in August, down from the revised 526,000 in July.
According to the Bureau of Labor Statistics (BLS), the unemployment rate edged higher to 3.7 percent, up from 3.5 percent.
Economists had forecast a gain of 300,000 new jobs and a jobless rate of 3.5 percent.
The BLS also revised the June total non-farm payroll employment number by 105,000, from 398,000 to 293,000. The July report was also modified by 2,000 to 526,000.
Job creation in August was broad-based, BLS data show, with professional and business services (68,000), health care (48,000), and retail (44,000) leading the way. Manufacturing employment jumped 22,000, while mining jobs rose 6,000. Positions in the financial activities sector advanced by 17,000.
Employment levels in multiple industries were little changed, including construction, transportation and warehousing, information, and government.
The labor force participation rate–the number of people in the labor force (working or searching for a job) as a percentage of the population–climbed to 62.4 percent, up from 62.1 percent in July. This was driven by more people returning to the labor force.
Average weekly hours eased from 34.6 to 34.5. Average hourly earnings were unchanged at 5.2 percent year-over-year. On a month-over-month basis, average hourly earnings rose by 0.3 percent, or 10 cents, to $32.36 last month.
The number of Americans who are currently working two or more jobs totaled 7.485 million, up from 6.783 million at the same time a year ago.
The financial markets rallied on the jobs data coming in as expected. The Dow Jones Industrial Average climbed more than 100 points in pre-market trading. The S&P 500 picked up 0.67 percent, while the Nasdaq Composite Index tacked on 0.68 percent.
Jan Szilagyi, the CEO and founder of Toggle AI, an investment research firm, called it a “goldilocks” report, with labor market tightness easing up but the economy still humming along.
“A tick up in the unemployment rate suggests some slackening of the extraordinarily tight labor market, good news for the Fed,” he said in a note. “It gives the Fed a bit of breathing room because the economy may not be as red hot anymore (so the hikes are at least showing some effect already).”
A Week of Labor Data
Before the BLS published the August jobs report, there were other numbers that offered some insights into the current state of the U.S. labor market.
In August, private companies hired 132,000 workers, according to ADP Research Institute’s new National Employment Report published on Wednesday. This was down from the 268,000 jobs in July and represents the smallest gain since the beginning of 2021.
“Our data [suggest] a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals. We could be at an inflection point, from super-charged job gains to something more normal,” said Nela Richardson, the chief economist at ADP, in a statement.
The number of Americans filing for unemployment claims eased to 232,000 in the week ending Aug. 27, below the market estimate of 248,000. This was also slightly down from the previous week’s reading of 237,000. Continuing jobless claims rose to 1.438 million, while the four-week average, which eliminates week-to-week volatility, fell to 241,500.
What may have been the most surprising labor update this week was the number of job openings. According to the BLS, job openings increased by 199,000 to 11.2 million, higher than economists’ expectations of 10.45 million. Moreover, 4.179 million Americans quit their jobs in July, down from 4.253 million in June.
U.S.-based companies announced intentions to slash 20,485 jobs in August, down from 21 percent in July, new numbers confirmed. This was the lowest reading since February, but it was also up 30 percent from the same time a year ago.
“Employment data continue to point to a strong labor market. Job openings are high, layoffs are low, and workers seem to have slowed their resignations. If a recession is imminent, it’s not yet reflected in the labor data,” said Andrew Challenger, senior vice president of Challenger, Gray & Christmas, Inc., in a statement.
Wages have remained strong, too. Morning Consult’s latest high-frequency data suggested that the share of U.S. adults reporting lost income or pay tumbled to 10.5 percent last month, down from 11.7 percent in July.
“The labor market has so far withstood aggressive rate hikes and growing economic headwinds,” said John Leer, chief economist at Morning Consult. “This month’s drop in lost pay is positive news for workers in the short term, but tackling inflation without spurring major layoffs will remain a tricky needle for the Fed to thread.”
Will the Labor Market Hold Steady?
Federal Reserve Chair Jerome Powell’s recent Jackson Hole Economic Symposium speech was crucial for the U.S. economy and the financial markets. The central bank chief abandoned his “soft landing” proposal and hinted at a “growth recession,” one that consists of tepid economic growth and rising unemployment.
Economists contend that it typically takes between 6 and 12 months for higher interest rates to seep into the economy and have a larger impact on conditions. It has been six months since the Fed began moving forward with rate hikes. So, could the sizzling labor market be on the cusp of slowing down?
A new survey by consultancy firm PricewaterhouseCoopers found that half of the executives and board members surveyed are getting ready to trim staffing levels. Fifty-two percent have already instituted hiring freezes, while 46 percent of firms are ending or decreasing signing bonuses.
“Respondents are also taking proactive steps to streamline the workforce and establish the appropriate mix of worker skills for the future,” the survey said. “This comes as no surprise. After a frenzy of hiring and a tight labor market over the past few years, executives see the distinction between having people and having people with the right skills.”
Labor productivity weakened considerably in the first half of 2022. The Conference Board’s third-quarter Measure of CEO Confidence™ tumbled for the fifth straight quarter. Corporations, from Snap to T-Mobile, are cutting jobs.