By PAUL WISEMAN and ANNE D’INNOCENZIO | AP Business Writer
The latest jobs report from the Labor Department reveals that America’s labor market is showing signs of resilience, with the addition of 187,000 jobs in August. Despite the high interest rates imposed by the Federal Reserve, the job growth for the month was an improvement from July’s numbers. However, the pace of hiring has been moderating compared to the robust gains witnessed in previous years. From June to August, the economy added 449,000 jobs, which is the lowest three-month total in three years. Additionally, the gains for June and July were revised down by 110,000.
Although the unemployment rate rose from 3.5% to 3.8%, it is still relatively low by historical standards. The increase in the unemployment rate can be attributed to a significant number of people actively seeking employment, with 736,000 individuals starting the job search in August, the highest number since January. The percent of Americans either employed or actively seeking employment also rose to 62.8%, the highest level since February 2020 before the COVID-19 pandemic impacted the economy.
The Federal Reserve’s 11 interest rate hikes have contributed to a deceleration in inflation, down from 9.1% last year to 3.2% currently. A slower job market could further ease inflation and assure the Federal Reserve that inflation will continue to decrease. Many economists believe that there may not be a need for further rate hikes in this scenario.
The jobs report also indicated a tapering of wage gains, which could be reassuring as it may signify a cooling of inflationary pressures. Average hourly pay rose only 0.2% from July to August, the smallest increase in a year and a half. Year over year, wages were up 4.3% from August 2022, slightly below the increases in both July and June.
The Federal Reserve aims for a slowdown in hiring to prevent wage inflation and curb overall inflation without causing a severe recession. Gus Faucher, chief economist at PNC Financial Services Group, commented that the August jobs report aligns with the Federal Reserve’s objectives and could contribute to a soft landing for the economy. However, Faucher also noted that there may still be lingering effects of the Federal Reserve’s rate hikes, which could lead to a recession in early 2024.
Despite the moderation in job growth, employers are still hiring, and some are finding it challenging to fill positions. Companies like InCharge, focused on developing charging systems for electric vehicles, are adding employees each month. However, there are indications that the job market is slowing down, with an increase in recruiting companies representing job seekers.
Another notable company, Oransi, plans to bring manufacturing jobs back to the United States from China, reflecting a shift in consumer demand for air purifiers caused by the pandemic. However, the company has redesigned its product to reduce labor costs and lower the retail price to meet market saturation.
There are also businesses facing challenges due to inflated costs, such as Halliday Brothers Contracting, a roofing company in Mesa, Arizona. The surge in material costs, such as shingles and tar paper, has led to a delay in hiring contractors. This uncertainty in the economy has made customers hesitant to spend.
The jobs report suggests that the economy is approaching pre-pandemic conditions, leading to optimism about a soft landing. Economists and analysts increasingly believe that the Federal Reserve may halt interest rate hikes, with futures markets indicating a greater than 90% probability of rates remaining unchanged at the next meeting.
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