Despite the high interest rates the Federal Reserve has imposed, firms across the country added a respectable 187,000 jobs in August, showing that the labor market is still robust.
The boost in employment was higher than July’s revised gain of 157,000 jobs, but it still indicated that hiring was slowing down compared to earlier this year.
The unemployment rate increased from 3.5% to 3.8%, which is relatively low by historical standards but the highest level since February 2022.
A slowing job market may aid in slowing down the economy and reassuring the Fed that inflation will continue to fall. Inflation has decreased from a peak of 9.1% last year to 3.2% as a result of the Fed’s ongoing streak of 11 interest rate increases.
Many experts believe the Fed may decide there is no longer a need to raise interest rates given the signals that inflation has continued to decline.
Due to the tendency of high labor demand to drive up wages and fuel inflation, the Fed wants to see hiring slow down.
The goal of the central bank is to accomplish a rare “soft landing,” in which rate increases are successful in containing rising inflation without triggering a severe recession by managing to decrease hiring, borrowing, and spending.
The likelihood of a soft landing has been increasing. The economy has resisted the pressure of rising borrowing costs despite expanding more slowly than it did in the boom that followed the pandemic recession of 2020. From April to June, the economy’s total output of goods and services increased at a healthy annual pace of 2.1%. Both firms’ investments and consumer spending increased.
There haven’t been many layoffs thus far since the employment market has cooled in the least unpleasant way conceivable. It is anticipated that the unemployment rate in August stayed at 3.5%, just above a 50-year low.
Additionally, the Labor Department noted on Thursday that fewer Americans, who serve as a proxy for job losses, applied for unemployment benefits for the third consecutive week.
Companies are not cutting jobs; instead, they are posting fewer positions—8.8 million in July, which is the lowest number since March 2021.
Additionally, 3.5 million people left their jobs in July, the fewest since February 2021, indicating that American employees are less willing to leave their jobs in search of a better salary, benefits, and working conditions abroad. Reduced turnover generally lessens pressure on employers to increase wages.
The Friday jobs data may be difficult despite what seems to be a clear trend toward reduced hiring.
The Labor Department’s attempts to adjust hiring figures for seasonal swings may run into difficulties once school resumes because many teachers are abandoning temporary summer jobs to return to the classroom.
Additionally, it is believed that August’s job growth was restrained by the closure of the significant transportation company Yellow and the Hollywood actors and writers strike.
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