WASHINGTON (AP) — In August, US employers added 187,000 jobs, indicating a slowing yet robust labor market despite the Federal Reserve's high interest rates.
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The job growth in the previous month was an improvement from July's revised gain of 157,000, but it still suggested a slowing rate of hiring compared to the significant gains of last year and earlier this year. From June to August, the economy added 449,000 jobs, the lowest total for a three-month period in three years. Furthermore, the government reduced the gains for June and July by a total of 110,000.
The Labor Department's report on Friday also revealed that the unemployment rate increased from 3.5% to 3.8%, the highest level since February 2022, although still low by historical standards. However, the rate increased for a positive reason: A significant number of people — 736,000 — started looking for work last month, the highest number since January, and not all of them found jobs immediately. Only those actively seeking employment are considered unemployed.
In fact, the percentage of Americans who either have a job or are searching for one increased in August to 62.8%, the highest level since February 2020, before the COVID-19 pandemic hit the US economy.
The Fed’s series of 11 interest rate increases has contributed to slowing inflation from a high of 9.1% last year to 3.2% currently. A slowing job market could help transition the economy into a slower phase and reassure the Fed that inflation will continue to decrease. For this reason, many economists believe the central bank may decide that no additional rate increases are needed.
Friday’s jobs report also indicated that wage increases are slowing, a trend that may help reassure that inflation pressures are decreasing: Average hourly pay increased 0.2% from July to August, the smallest such increase in a year and a half. Measured year over year, wages in the previous month were up 4.3% from August 2022, slightly below the 4.4% increase in both July and June.
The Fed aims to slow hiring because strong demand for labor tends to inflate wages and fuel inflation. The central bank hopes to achieve a rare “soft landing,” where its rate increases would manage to slow hiring, borrowing, and spending enough to control inflation without causing a severe recession.
“This is close to what the Fed wants to see,’’ stated Gus Faucher, chief economist at PNC Financial Services Group. The August jobs report "could be a way to a soft landing.”
However, Faucher warned that the economy may not have fully absorbed the impact of the Fed's rate increases, which is why he still anticipates a recession in early 2024.
So far, the job market has been cooling in the least painful way possible — with few layoffs. The Labor Department reported on Thursday that the number of Americans applying for unemployment benefits — a measure of job cuts — decreased for a third consecutive week.
Among sectors of the economy, the largest hiring gain last month — 97,000 — occurred in the health care industry, which does not rely on the economy's fluctuations. Construction companies added 22,000, factories 16,000, and bars and restaurants nearly 15,000.
In contrast, trucking companies lost 37,000 jobs, reflecting the closure of the Yellow trucking company. And music and movie companies lost 17,000, a decrease that the Labor Department attributed to striking Hollywood actors and writers.
Overall, some economists viewed Friday's report as reflecting an economy that is reverting to its pre-COVID state, before the pandemic recession hit in 2020, followed by a rapid economic recovery.
“The 187,000 increase in non-farm payrolls, rise in the unemployment rate, and slowdown in wage growth in August all contribute to the evidence that labor market conditions are nearing pre-pandemic norms,’’ wrote Andrew Hunter of Capital Economics in a research note.
Optimism about a soft landing has been increasing. The economy, although expanding more slowly than it did in the boom that followed the 2020 pandemic recession, has resisted the pressure of rising borrowing costs. The gross domestic product — the economy’s total output of goods and services — increased at a respectable 2.1% annual rate from April to June. Consumer spending continued, and businesses increased their investments.
Economists and financial market analysts increasingly believe the Fed may have finished raising interest rates: According to data tracked by the CME Group, futures market traders see a more than 90% chance that the Fed's policymakers will maintain rates at their next meeting, Sept. 19-20.
Even with the slowdown in job growth, many employers are still hiring, and some are struggling to fill positions. One such company, InCharge, which develops charging systems for electric vehicles, is adding 6-10 employees each month to its approximately 200-strong workforce. The company, based in Santa Monica, California, has hired two in-house recruiters, in addition to working with employment agencies and offering bonuses to employees who recruit new staff.
However, Terry O’Day, the chief operating officer, said he does see signs that the job market is slowing. He’s hearing from more recruiting companies that represent people looking for work.
Another company, Oransi, a manufacturer of air purifiers, plans to hire 100 workers in the United States over the next two years, reflecting a shift in its manufacturing from China to Radford, Virginia. CEO Peter Mann said the shift was driven by the pandemic, which increased consumer demand for air purifiers and consequently a surge in competitors.
Given what Mann says is now a saturation of air purifier manufacturers, Oransi has redesigned its product to be less labor-intensive. Its retail price will be about $200, instead of approximately $300.
Other companies are struggling with inflated costs. Among them is Halliday Brothers Contracting, a roofing business run by two brothers, John and Mike Halliday. The company, based in Mesa, Arizona, is postponing hiring contractors until the cost of materials like shingles and tar paper decrease.
Initially, the pandemic delayed projects because of infection concerns. Then costs soared. The price of one popular brand of roofing shingles has increased nearly 90% since the pandemic, leading to a rise in the cost of roof replacements — from $10,000 to $12,000 to as much as $17,000.
Having reduced the number of its roofing projects, the company now contracts with about 20 workers, down from 30 to 35.
Mike Halliday said customers are becoming anxious about the economy's outlook.
“When they’re uncertain about what the economy’s going to look like and what’s going to happen with banks," he said, “people don’t want to spend.”
D'Innocenzio reported from New York.