The unemployment rate in the United States rose to 3.8%; The job market still has momentum

  • Nonfarm payrolls increased by 187,000 in August
  • The unemployment rate rose to 3.8% from 3.5% in July
  • Average hourly earnings earn 0.2%; An increase of 4.3% year on year

WASHINGTON (Reuters) – U.S. job growth recovered in August, but the unemployment rate jumped to 3.8 percent and wage gains eased, indicating that labor market conditions are improving and bolstering expectations that the Federal Reserve will not raise rates. Interest this month. .

The Labor Department’s closely watched employment report on Friday showed that 736,000 people entered the labor market last month, boosting the participation rate to the highest level in three and a half years. Concerns about the economic slowdown are likely drawing people back into the job market.

The economy created 110,000 fewer jobs than previously reported in June and July, which some economists said suggested there were business closures that had not been seen before. The report follows news this week that job opportunities fell to their lowest level in two-and-a-half years in July.

The labor market is slowing in response to large interest rate increases by the US central bank to cool demand in the economy.

“This is probably the final nail in the coffin of the chances of another Fed rate hike in September,” said Christopher Rupke, chief economist at FWDBONDS in New York.

Nonfarm payrolls rose by 187,000 jobs last month after rising by 157,000 jobs in July. Job growth averaged 150,000 jobs per month over the past three months, down sharply from 238,000 in the three months through May.

Economists polled by Reuters had expected the number of jobs to increase by 170,000 jobs last month. However, employment gains remain well above the roughly 100,000 jobs per month needed to keep pace with the increase in the working-age population. The share of industries adding jobs was the highest in seven months, indicating underlying strength in the labor market.

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A Hollywood actors’ strike led to the loss of 17,000 jobs in the motion picture and sound recording industries last month. The bankruptcy of trucking company Yellow in early August led to the loss of 37,000 jobs in the trucking industry. Without these one-time slowdowns, payrolls would have increased by about 241,000 jobs in August.

“This is not the labor market picture we would expect to see if the economy was at risk of slowing significantly in the short term, although there are undoubtedly signs of moderation,” said Rick Reeder, chief investment officer at Global Firm. Income at BlackRock.

Stocks on Wall Street were trading mostly lower after rising earlier. The dollar rose against a basket of currencies. US Treasury yields rose.

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Although demand for labor has declined, some service businesses such as healthcare, restaurants, bars, and hotels are still in dire need of workers.

The health care sector led employment gains in August, adding 71,000 jobs, spread across ambulatory services, hospitals, nursing facilities and residential care.

Leisure and hospitality salaries increased by 40,000. Employment in the industry remains 290,000 jobs below its pre-pandemic level. The construction industry added 22,000 jobs, while manufacturing sector payrolls rebounded by 16,000 jobs.

An employee hiring sign with a QR code is seen in a business window in Arlington, Virginia, US, April 7, 2023. REUTERS/Elizabeth Frantz/File Photo Obtaining licensing rights

Employment in the professional and business services sector rose by 19,000, but temporary assistance services, seen as a harbinger of future employment, continued to decline, with 19,000 job losses. Government salaries rose slightly.

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The transportation and warehousing sector lost 34,000 jobs, with employment in the sector also falling due to the loss of 9,000 jobs in couriers and couriers.

Slowing wage growth

Wage growth was moderate last month. Average hourly earnings rose 0.2%, the smallest rise since February 2022, after rising 0.4% in July. In the 12 months through August, wages rose 4.3% after a 4.4% increase in July.

Wages are still rising faster than the 3.5% pace that economists say is consistent with the Fed’s 2% target. As more people leave their jobs in search of greener ones, wage growth may continue to decline. But some economists worry that recent union contracts, including one with United Parcel Service, could put upward pressure on wages.

The UAW said last month that members voted overwhelmingly to allow strikes at General Motors (GM.N), Ford Motor (FN) and Stellantis (STLAM.MI), if an agreement on wages and retirement plans is not reached before then. The current four-year contract expires on September 14.

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Since March 2022, the Fed has raised the interest rate by 525 basis points to the current range of 5.25% to 5.50%. Financial markets are now betting that the central bank is done raising interest rates and may start cutting them next year, according to CME Group’s FedWatch. Fed rate futures show only a slight chance of a rate hike at the September 19-20 meeting.

There was no sign of employers reducing working hours last month. Average weekly working hours rose to 34.4 hours from 34.3 in July. This contributed to an increase in overall wage income, which would support consumer spending and the economy as a whole.

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The economic outlook also received a boost from other data released on Friday showing a rise in construction spending in July and a slowing pace of contraction in manufacturing in August.

Although domestic employment increased by 222,000 people in August, it was not enough to absorb the 736,000 people who entered the force.

That pushed the unemployment rate to 3.8%, the highest level since February 2022, from 3.5% in July. And the unemployment rate remains below the Fed’s latest average estimate of 4.1% by the fourth quarter of this year. The increase in the unemployment rate was concentrated among young people.

The labor force participation rate, or the share of working-age Americans who have or are looking for a job, rose to 62.8%. This was the highest level since February 2020 and was up from 62.6% in July. The rise was mostly among young people and women aged 55 and older.

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“The increase among women aged 55 and over is promising if it continues, because it could signal the end of the early retirement trend,” said Stephen Juneau, US economist at Bank of America Securities in New York. “The increase among men ages 16 to 19 is mixed news because these workers may not be in college and are now less likely to go.”

Reporting by Lucia Mutikani; Edited by Nick Zieminski, Chizu Nomiyama, and Paul Simao

Our standards: Thomson Reuters Principles of Trust.

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