US added 315,000 jobs in August despite inflation and rising interest rates

US employers added a good number of jobs last month, but slowed hiring enough to potentially help the Federal Reserve in its fight to reduce galloping inflation.

The economy gained 315,000 jobs in August, a still strong figure that indicates an economy that remains resilient despite rising interest rates, high inflation and sluggish consumer spending. Friday’s government report also showed the unemployment rate rose to 3.7% from a half-century low of 3.5%. Yet this increase was also an encouraging sign: it reflected a long-awaited increase in the number of Americans looking for work.

“This is a very positive report and still leaves open the possibility of a soft landing,” said Ellen Gaske, economist at PGIM Fixed Income, referring to the Fed’s aim to slow the economy enough to cool. inflation without going so far as to cause a recession.

Prices are rising at nearly the fastest rate in 40 years, giving congressional Republicans a hammer to use against Democrats in the fall legislative election. Texas Republican Representative Kevin Brady noted on Friday that salary increases do not keep up with inflationleaving Americans with “dwindling paychecks”.

The White House pushed back, claiming credit for what it calls proof that the economy remains on solid ground.

“Jobs are up, wages are up, people are back to work and we’re seeing signs that inflation may be, may be … starting to ease,” President Joe Biden said Friday.

Inflation has made fall at an annual rate of 8.5% in July compared to 9.1% in June, mainly due to the constant drop in gasoline prices. Pump prices fell to $3.81 a gallon on Friday after peaking at $5.02 in mid-June. But inflation has fallen in the past only to rise again, and few economists are prepared to say it has peaked.

August’s hiring gain was down from the 526,000 jobs added in July, and it fell below the average increase of the previous three months. Wage growth also weakened a little last month, which could also help the Fed’s fight against inflation. The average hourly wage rose 0.3% from the previous month, the smallest increase since April. Businesses typically pass the cost of higher wages onto their customers through higher prices, thus fueling inflation.

Gaske suggested the numbers could allow the Fed to raise its benchmark short-term interest rate by half a percentage point at its next meeting later this month, rather than three-quarters of a percentage point. point, as many Wall Street traders and some economists have expected. Either size increase would exceed the typical Fed hike by a quarter of a percentage point. When the Fed raises its rate, it leads over time to higher rates on mortgages, auto loans, and business borrowings and can weaken the economy.

The Fed is rapidly rising rates try to cool the economy and reduce inflation. Some economists, however, fear that the Fed is tightening credit so aggressively that it will end up tipping the economy into recession.

Most industries added workers last month, with the biggest increases in professional and business services, which gained 68,000 jobs. This sector includes architects, engineers and some technicians. Health care added 61,500 jobs, retailers 44,000.

Some companies, especially in technology, have announced layoffs in recent months. On Wednesday, Snap, the parent company of social media platform Snapchat, said it would cut 20% of its workforce. Fitness equipment maker Peloton, stock market app Robinhood and online furniture Wayfair also announced they were laying off workers. Bed, bath and beyond says it will close 150 stores and cut its workforce by 20%.

Yet with unemployment still very low and many businesses desperate to find workers, people who have been laid off are still finding plenty of opportunities elsewhere. One enthusiastic employer is TruBlue Total House Care, which does home renovations and repairs, with a focus on making homes safer for seniors.

Sean Fitzgerald, president of Cincinnati-based TruBlue, said all of its 87 locations posted job openings. The number of people applying has increased recently, he said — a welcome sign for a company that was short-staffed shortly after COVID-19 hit in the spring of 2020.

“We have far more inquiries than employees,” Fitzgerald said. “Our biggest hurdle continues to be hiring enough qualified employees.”

To help retain its workers, TruBlue in some cases lends company vehicles to employees and pays for gas.

Fitzgerald said a slowdown in housing construction, one of the consequences of Fed rate hikes, likely cost some construction workers their jobs, making it easier for his company to hire.

Becky Frankiewicz, president of staffing firm Manpower Group North America, said laid-off workers, especially in tech, are quickly being rehired. Software development, she said, is the second most in-demand skill, behind nursing. The labor market is “the eye of the economic hurricane”, she said, with resilient hiring despite the turbulence created by weaker growth and high inflation.

But Frankiewicz said she was starting to see early signs that employers were calling back: Job openings at Manpower were down 6% in August from a month ago. Wage growth has also started to level off.

Mathieu Stevenson, CEO of Snagajob, an hourly hiring platform, said his company has also seen a slight drop in job postings, although hiring is still strong. Some employers, after being short-staffed for so long, seem to have figured out how to cope with fewer workers, he said — a trend that could slow future job gains.

“People are less freaked out by understaffing because they’ve gotten so used to operating with it,” Stevenson said. “And so they’re much less aggressive about how hard they try to hire.”

Recent data has painted a somewhat contradictory picture of the economy. The economy’s broadest measure of output – gross domestic product – declined for two consecutive quartersmeeting an informal definition of a recession. Yet another measure, focused on income, indicates that the economy grew in the first half of the year, albeit slowly.

Fed Chairman Jerome Powell, in a highly publicized speech last week, has made it clear that the central bank is ready to keep raising short-term interest rates and keep them high to keep fighting inflation. Powell warned that the Fed’s inflation fight would likely cause suffering for Americans in the form of a weaker economy and job losses.

The Fed chairman also said the labor market was “clearly out of balance”, with demand for workers “far outstripping” the available supply. Friday’s jobs numbers and a report earlier this week that showed the number of job openings rose in July suggest the Fed’s rate hikes so far haven’t restored much of balance.

There are about two advertised job vacancies for every unemployed person.

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