April 16, 2024

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The unemployment rate in the United States rose to 3.8%;  The job market is still enjoying momentum

The unemployment rate in the United States rose to 3.8%; The job market is still enjoying momentum

  • Nonfarm payrolls increased by 187,000 in August
  • The unemployment rate rose to 3.8% from 3.5% in July
  • average hourly earnings of 0.2%; up 4.3% year on year

WASHINGTON (Reuters) – U.S. job growth rebounded in August, but the unemployment rate jumped to 3.8 percent and wage gains eased, suggesting labor market conditions are heading for an improvement and reinforcing expectations that the Federal Reserve will not raise rates. interest this month. .

The closely watched employment report from the Labor Department on Friday showed that 736,000 people entered the job market last month, boosting the participation rate to the highest level in three and a half years. It is possible that concerns about the economic slowdown will attract people back into the labor market.

The economy created 110,000 fewer jobs than previously reported in June and July, which some economists said indicated there were previously unseen business closings. The report followed news this week that job openings fell to a 2-1/2 year low in July.

The labor market slows in response to large interest rate increases by the US central bank to cool demand in the economy.

“This is probably the final nail in the coffin for chances of another rate hike by the Fed in September,” said Christopher Roepke, chief economist at FWDBONDS in New York.

Nonfarm payrolls increased by 187K last month after rising by 157K in July. Job growth averaged 150,000 per month over the past three months, down sharply from 238,000 in the three months through May.

Economists polled by Reuters had expected an increase in the number of jobs by 170 thousand jobs last month. However, employment gains remain well above the roughly 100,000 jobs per month needed to keep up with the increase in the working-age population. The share of industries adding jobs was the highest in seven months, indicating the underlying strength of the labor market.

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A Hollywood actors’ strike cut 17,000 jobs in the motion picture and sound recording industries last month. The bankruptcy of trucking company Yellow in early August resulted in the loss of 37,000 jobs in the trucking industry. Were it not for these one-off slowdowns, payroll would have increased by about 241,000 jobs in August.

“This is not the labor market picture we would have expected to see if the economy were at risk of slowing significantly in the short term, although there are undoubtedly signs of moderation,” said Rick Reader, chief investment officer at Global Steady. Income at BlackRock.

Stocks on Wall Street traded mostly lower after rising earlier. The dollar rose against a basket of currencies. US Treasury yields rose.

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Although the demand for labor has declined, some service companies such as healthcare, restaurants, bars and hotels are still in dire need of workers.

The healthcare sector led employment gains in August, adding 71,000 jobs, spread over mobile services, hospitals, nursing facilities and residential care.

Entertainment and hospitality salaries increased by 40,000. Employment in the industry remains 290,000 fewer than its pre-pandemic level. The construction industry added 22,000 jobs, while manufacturing sector payrolls rebounded by 16,000 jobs.

An employee employment sign with a QR code is seen in a business window in Arlington, Virginia, US, April 7, 2023. REUTERS/ELISABET FRANZZ/FILE PHOTO Obtain licensing rights

Employment in the professional and business services sector rose by 19,000, but temporary assistance services, seen as a harbinger of future employment, continued to decline, with 19,000 job losses. Government salaries rose slightly.

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The transportation and warehousing sector lost 34,000 jobs, with employment in the sector also declining due to the loss of 9,000 courier and courier jobs.

Slowing wage growth

Wages growth moderated last month. Average hourly earnings rose 0.2%, the smallest rise since February 2022, after rising 0.4% in July. In the 12 months through August, wages rose 4.3% after a 4.4% increase in July.

Wages are still rising faster than the 3.5% pace that economists say is consistent with the Fed’s target of 2%. And with more people leaving their jobs in search of greener jobs, wage growth may continue to decline. But some economists worry that recent union contracts, including one with United Parcel Service, could put upward pressure on wages.

The UAW said last month that members voted overwhelmingly to allow strikes at General Motors (GM.N), Ford Motor (FN) and Stelantis (STLAM.MI) if no agreement on wages and retirement plans is reached before then. The current four-year contract expires on September 14.

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Since March 2022, the Fed has raised the interest rate by 525 basis points to the current range of 5.25% to 5.50%. Financial markets are now betting that the central bank is done raising interest rates and may start cutting them next year, according to CME Group’s FedWatch. Fed rate futures show only a slight chance of a rate hike at the September 19-20 meeting.

And there was no sign of employers cutting hours last month. Average hours worked per week rose to 34.4 hours from 34.3 in July. This has contributed to an increase in total wage income, which should support consumer spending and the economy as a whole.

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The economic outlook also got a boost from other data released on Friday showing construction spending picked up in July and the pace of contraction in manufacturing slowed in August.

Although domestic employment increased by 222,000 people in August, it was not enough to absorb the 736,000 people who entered the force.

That pushed the unemployment rate to 3.8%, the highest level since February 2022, from 3.5% in July. And the unemployment rate remains below the Fed’s latest average estimate of 4.1% by the fourth quarter of this year. The increase in the unemployment rate was concentrated among the youth.

The labor force participation rate, or the share of working-age Americans who have or are looking for a job, rose to 62.8%. This was the highest level since February 2020 and was up from 62.6% in July. The rise was mostly among young men and women aged 55 and over.

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“The increase among women aged 55 and over is promising if it continues, because it could signal the end of the early retirement trend,” said Stephen Juneau, US economist at Bank of America Securities in New York. “The increase among 16- to 19-year-old men is conflicting news because these workers may not be in college and are now less likely to go.”

Reporting by Lucia Moticani; Editing by Nick Zyminski, Chizu Nomiyama, and Paul Simao

Our standards: Thomson Reuters Principles of Trust.

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