Employers added 187000 jobs in August despite the high interest rates the Federal Reserve has imposed, 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. Although it is relatively low by historical standards, the jobless rate increased from 3.5 percent to 3.8 percent, the highest level since February 2022.
A slowing employment 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 percent last year to 3.2 percent as a result of the Fed’s ongoing run of 11 interest rate increases. Many experts believe the Fed may determine there is no longer a need to raise interest rates given signals that inflation has continued to decline and Employers added 187000 jobs in August.
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 gentle 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 reasonable annual pace of 2.1 percent. Both firms’ investments and consumer spending grew.
Strong demand for labor has a tendency to drive up salaries and fuel inflation, so the Fed wants to see hiring slow down.
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 jobless rate in August stood at 3.5 percent, just above a 50-year low as Employers added 187000 jobs in August. Additionally, the Labor Department noted on Thursday that fewer Americans, who serve as a proxy for job losses, applied for unemployment benefits for a third consecutive week.
Companies are not cutting employment; instead, they are advertising fewer positions; 8.8 million in July, which is the lowest number since March 2021. Additionally, 3.5 million individuals departed their employment in July, the fewest since February 2021, indicating that American employees are less willing to leave their positions in pursuit of better salary, benefits, and working conditions abroad. Companies are less under pressure to increase wages to retain current employees or recruit new ones when the rate of resignations is lower.
Analysts of the financial markets and economists agree that the Fed may have reached its limit in raising interest rates: The CME Group’s survey of analysts found that almost 90% of them believe the Fed will maintain interest rates at its upcoming meeting on September 19–20.
The Friday employment data may be difficult despite what seems to be a clear trend toward reduced hiring as Employers added 187000 jobs in August. The Labor Department’s attempts to adjust hiring figures for seasonal swings may run into difficulties once school resumes since many teachers are abandoning temporary summer jobs to return to the classroom.
Additionally, it is believed that August’s employment growth was restrained by the closure of the significant transportation company Yellow and the Hollywood actors and writers strike.
President Joe Biden praised a positive monthly employment report on Friday, calling it “one of the strongest job-creating periods” in the nation’s history and attempting to contrast his government with that of Donald Trump.
People are returning to their jobs and leaving the sidelines, Biden said during remarks at the White House.
Using the pandemic-damaged economy the previous government left office with, Biden tried to contrast himself with former President Donald Trump as Employers added 187000 jobs in August, the top GOP candidate to run against him in the 2024 general election.
America was losing employment not too long ago, according to Biden. In actuality, only two presidents in history have entered office with fewer jobs than when they departed, according to my predecessor.
The employment figures came as officials at the central bank are debating whether to hike interest rates once more when they meet this month. While many economists and liberal politicians have suggested that more rate rises are not essential at this time, Fed Chair Jerome Powell has indicated that the fight against inflation is not finished and that the board remains dedicated to a 2 percent objective.
Inflation has decreased from a peak of 9.1 percent last year to 3.2 percent on an annualized basis, according to Biden.
Biden stated that “some experts said we needed higher unemployment and lower wages to get inflation under control.” “But I’ve never believed that having too many jobs or that working people earning too much money was an issue. It matters now because we’ve been driving down inflation for months while both creating jobs and raising salaries. Employers added 187000 jobs in August. Bidenomics is working.
He also supported a new Labor Department regulation put up this week that would expand the number of workers eligible for overtime pay. These investments in sustainable energy were made possible by the Inflation Reduction Act, one of his administration’s landmark policies.