The economy added 187,000 jobs in August, slightly above what the market had predicted. And while unemployment also increased, it is still not too far from a 50-year low, according to the latest employment report from the Bureau of Labor Statistics (BLS).
August’s job growth was seen across several industries, primarily driven by health care, leisure and hospitality, social assistance and construction jobs, according to BLS.
The unemployment rate rose by 0.3 percentage points in August to 3.8%, up from the 3.5% recorded last month. The jump means an additional 514,000 lost their jobs in August, bringing the number of unemployed people in the country to roughly 6.4 million. The unemployment rate has ranged from 3.4% to 3.7% since March 2022, according to the BLS.
Wage growth increased by 0.2%, a similar rate as the previous month. Over the past 12 months, average hourly earnings rose by 4.3%.
“The report also suggested that wage growth — a key concern for Fed policymakers — is moderating,” Jim Baird, Plante Moran Financial Advisors’ chief investment officer, said in a statement. “Average hourly earnings rose by 0.2% for the month, a pace that should be much more palatable to the Fed as they work to get the inflation genie back in the bottle.
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A cooling jobs market could be the ingredient needed to get the Federal Reserve to hit pause on an additional interest rate increase this month, according to Baird.
“The bottom line? Labor conditions continue to cool as the tangible effects of the Fed’s inflation playbook filter into the real economy. For now, the slowdown hasn’t reached stall speed, and the economy remains on a growth trajectory,” Baird said. “Whether or not that can be sustained will depend on the degree to which prior rate hikes weigh further on growth and the extent to which policymakers deem additional tightening is needed to ensure a return to the Fed’s inflation target.”
Fed chair Jerome Powell said last week at the Kansas City Fed’s conference in Jackson Hole, Wyoming, that while inflation has moderated, it remained too high, and central bankers were prepared to tighten more if necessary.
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The upbeat jobs report has renewed belief that the U.S. economy may be able to skirt a recession, according to Baird. Unless evidence of a more pronounced slowdown leading to more significant job losses emerges, “there appears to be enough good news to keep near-term recession worries at bay for now,” Baird said.
Matt Schoeppner, a senior economist at U.S. Bank, said economic growth is likely to slow, but a recession isn’t on the cards.
“It seems likely the economy may avoid a recession, but we expect that real GDP growth will remain modest in the near term,” Schoeppner said in a statement. “It might qualify as what we call a ‘growth recession,’ where we see a slow economy, but with few ramifications for the job market.”
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