In August, the US labor market showed its resilience as employers added a solid 187,000 jobs, despite the high interest rates imposed by the Federal Reserve. Although this marked an improvement from the revised gain of 157,000 in July, the pace of hiring has moderated compared to earlier this year. It’s worth noting that the June gain was also downwardly revised from 185,000 to 105,000, according to CNN. Additionally, the unemployment rate rose from 3.5% to 3.8%, reaching its highest level since February 2022. Factors such as the shutdown of Yellow, a major trucking firm, and the strike by Hollywood actors and writers may have contributed to this slowdown in job growth in August.
The deceleration in the job market could potentially slow down the overall economy and provide reassurance to the Federal Reserve that inflation will continue to ease. The Federal Reserve has implemented 11 interest rate hikes, which have successfully helped lower inflation from its peak of 9.1% last year to the current rate of 3.2%. With signs of continued inflation easing, many economists believe that further rate hikes may not be necessary. The central bank hopes to achieve a “soft landing” by managing its rate hikes in a way that slows hiring, borrowing, and spending enough to curb high inflation without causing a severe recession. So far, the cooling job market has resulted in minimal layoffs.
The unemployment rate remains close to a 50-year low, and the Labor Department reported a third consecutive week of decline in the number of Americans applying for unemployment benefits, which serves as a proxy for job cuts. Instead of resorting to job cuts, companies are simply posting fewer job openings—8.8 million in July, the lowest number since March 2021. Moreover, fewer American workers are leaving their jobs in search of better pay, benefits, and working conditions. In fact, only 3.5 million people quit their jobs in July, the lowest number since February 2021. This decrease in the rate of job quitters relieves pressure on companies to raise salaries in order to retain existing employees or attract new ones.
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