The US added another 315,000 jobs in August as the jobs market remained strong amid signs of a worsening economy.
The US jobs market lost 22m jobs in early 2020 at the start of the pandemic but roared back after the Covid lockdowns ended. It has remained strong despite four-decade-high rates of inflation and slowing economic growth. In July, the US unexpectedly added 526,000 new jobs, restoring employment to pre-pandemic levels.
The unemployment rate ticked up to 3.7% in August from 3.5% in July but is still close to a 50-year low. The report also showed more people came off the sidelines in August and started looking for work.
The remarkable strength of the jobs market has the Federal Reserve worried that as employers compete for workers, wage inflation will keep driving prices higher. Average hourly earnings have increased by 5.2% in the last 12 months – faster than the 3% annual growth pre-pandemic but less than the 8.5% annual rate of inflation recorded in July.
The central bank has sharply increased interest rates in the hope of cooling the economy and bringing down prices.
Last week the Fed chair, Jerome Powell, made clear the Fed intends to keep raising rates sharply as the central bank struggles to tamp down inflation. His speech triggered a meltdown on Wall Street, with the Dow Jones index losing 1,000 points. The latest jobs report is the last to be released before the Fed meets again in September.
Nancy Vanden Houten, lead US economist at Oxford Economics, said there was “much to like in August’s job report” but added that it was unlikely to change Fed policy. “The modest slowdown in employment growth in August may be welcome by the Fed, but it won’t prevent further sizable rate hikes in the months ahead,” she wrote in a note to investors.
Earlier this week the White House press secretary, Karine Jean-Pierre, told reporters that the White House was “expecting job numbers to cool off a bit” as the economy transitions from the “historic economic growth that we saw last year to a more stable and steady growth”.
There are mixed signals about the health of the job market. Large employers including Ford and Walmart have announced plans for widespread layoffs, and 50% of businesses surveyed by PriceWaterhouseCoopers last month said they were reducing their headcount or planning to.
At the same time, the government reported this week there were 11.2m open job positions in July – two openings for every unemployed person. New claims for jobless benefits – seen as a proxy for layoffs – fell last week to a two-month low.
The government’s latest job report follows the monthly survey of private employers from ADP, the US’s largest payroll supplier. Private employers added only 132,000 jobs in August – less than half the number ADP calculates were added in July.
“Our data suggests a shift toward a more conservative pace of hiring, possibly as companies try to decipher the economy’s conflicting signals,” said Nela Richardson, chief economist at ADP. “We could be at an inflection point, from supercharged job gains to something more normal.”
