Employers added 187,000 jobs, and workers joined the labor market rapidly, surpassing wage inflation in August in positive signs of continued economic resilience amid the slowdown.
The unemployment rate rose to 3.8 percent, according to a report released by the Bureau of Labor Statistics on Friday, reflecting some job separations and also the addition of nearly 600,000 workers to the labor market for the first time.
The report also showed that wages increased by 4.3 percent, a sharper annual rise than the 3.3 percent inflation rate until July, according to the Personal Consumption Expenditures Price Index released on Thursday.
The August report comes as a result of 32 consecutive months of job growth, a political victory for President Joe Biden, who sought to cement a pro-worker record as he prepares for his re-election campaign after facing criticism over last year's rising inflation.
Speaking to reporters at the Rose Garden on Friday, Biden praised the report as evidence that "Bidenomics" of rebuilding the middle class is working.
Biden said, "Some experts said that in order to control inflation, we need to increase unemployment rates and reduce wages, but I never believed that was the problem - having too many people with jobs or workers having excessively high salaries. And now, after months and months of decreasing inflation while simultaneously adding jobs and increasing wages, that matters."
However, there are some signs of economic slowdown. The revised job numbers for June and July - a combined decrease of 110,000 jobs from previous reports - provide recent evidence that the labor market has significantly slowed since last year. The number of jobs created monthly has fallen to below 200,000 for three consecutive months, which has not happened since 2022.
Julia Pollak, chief economist at ZipRecruiter, said, "The labor market has returned to its pre-pandemic normal. The question is whether this will be the sustainable state of the labor market in the long run or if we will settle into something slower and cooler."
While the unemployment rate rose to its highest level in 18 months at 3.8 percent, economists cautioned against reading too much into the increase in unemployment rates, a volatile number, as it also reflects over 700,000 workers, some new and some not, currently searching for work.
Wages continued to rise in a variety of service sectors in August. Healthcare led the way, adding 71,000 jobs as it thrived due to the needs of the aging baby boomer generation. Hospitality and entertainment sectors, industries that lost many workers during the pandemic, continued their rebound, adding 40,000 new jobs. Social assistance, which includes social workers and home health aides, added 26,000 jobs.
Despite the construction sector's sensitivity to interest rate hikes, it remains surprisingly resilient due to infrastructure spending, adding 22,000 jobs in August.
Meanwhile, other sectors experienced notable slowdowns. The transportation and warehousing sector lost 34,000 jobs in August, with the closure of trucking giant Yello. The information sector, which includes technology and entertainment industries, lost 15,000 jobs. Jobs in the film and sound recording industry decreased by 17,000 as labor disputes effectively shut down Hollywood.
Nick Bunker, director of economic research at job site Indeed, said, "This report could have been stronger if not for these individual events. Job creation is still much higher than needed to keep up with population growth. It's still a very strong labor market."
Wages remained relatively unchanged in the manufacturing sector, wholesale and retail trade, and financial activities in August. These industries are experiencing minimal growth or no growth after rapid expansions during recent periods of prosperity resulting in part from pandemic-related closures.
Despite interest rate hikes for over a year, the strong labor market has supported the economy during tough periods earlier this year, including bank failures, a decline in the technology industry, and a slowdown in business investment that affected economic growth. Consumer spending this summer has supported demand for businesses, leading employers to create more job opportunities than there are unemployed individuals. In fact, layoffs remain low, and it appears that the country has avoided the recession that economists had anticipated for months.
The three major stock indexes fluctuated on the day of the jobs report on Friday, as investors seemed unenthusiastic about whether the Federal Reserve would raise interest rates again in September.
Hourly wages continued to rise, reaching an average of $33.82 per hour, surpassing inflation, but the pace of improvement slowed in August.
Overall, Americans continue to feel pessimistic about the economy. The Conference Board, a business research group, reported this week that consumer confidence declined in August.
"People don't really like inflation, and just because inflation has come down recently doesn't mean we should expect them to change right away," said Preston Moy, chief economist at "Amplify America," a left-leaning think tank.
Although the labor force participation rate for Americans remains lower than pre-pandemic levels - partially due to early retirement of baby boomers - labor force participation increased to 62.8% in August, the first increase since March. The participation rate for individuals aged 25 to 54, considered prime working age, who were either employed or actively seeking employment, reached its highest level in two decades.
Federal Reserve policymakers, along with other top economists, have revised their expectations for a recession this year as they point to signs of continued inflation decline in response to interest rate hikes without causing widespread job losses.
So far, central bankers have left the door open for another potential interest rate hike in September, considering that more progress needs to be made in combating inflation. However, the latest job-related figures have not definitively confirmed their decision in either direction.
This is partly because officials will have new data on inflation before their next meeting on September 19-20. The Federal Reserve has long stated that it needs to see months of data on inflation and the labor market to assess whether encouraging trends will continue - rather than reacting to individual reports.
Federal Reserve Chairman Jerome Powell reiterated last week that the central bank is determined. To achieve its inflation target, the labor market must weaken and the economy must slow down, Powell said. (In the September meeting, policymakers will issue new forecasts for how high the labor market will rise and how low economic growth will be amid high interest rates.)
"We will need price stability to achieve a sustained period of strong labor market conditions that benefit everyone," Powell said in a famous speech last week.
Government data also indicates that fewer workers are leaving their jobs in industries experiencing high burnout rates, even those that are still growing like healthcare, hospitality, and entertainment, which faced severe labor shortages during the coronavirus pandemic.
"Employers who have struggled to hire for years now don't necessarily have people to lay off, but they'll slow down hiring," said Rachel Sederberg, chief economist at "Lightcast," a labor market analytics company. "Things are returning to reasonable levels. We're not spending as much on services."
Kerry Wilson, a registered cardiac nurse in Asheville, North Carolina, considered quitting her job during the pandemic due to low wages and labor shortages. Inflation weighed heavily on her family, making it impossible to save money or even afford her son's school sports costs or summer vacations.
The three major stock indexes fluctuated on the day of the jobs report on Friday, as investors seemed unenthusiastic about whether the Federal Reserve would raise interest rates again in September.
Hourly wages continued to rise, reaching an average of $33.82 per hour, surpassing inflation, but the pace of improvement slowed in August.
Overall, Americans continue to feel pessimistic about the economy. The Conference Board, a business research group, reported this week that consumer confidence declined in August.
"People don't really like inflation, and just because inflation has come down recently doesn't mean we should expect them to change right away," said Preston Moy, chief economist at "Amplify America," a left-leaning think tank.
Although the labor force participation rate for Americans remains lower than pre-pandemic levels - partially due to early retirement of baby boomers - labor force participation increased to 62.8% in August, the first increase since March. The participation rate for individuals aged 25 to 54, considered prime working age, who were either employed or actively seeking employment, reached its highest level in two decades.
Federal Reserve policymakers, along with other top economists, have revised their expectations for a recession this year as they point to signs of continued inflation decline in response to interest rate hikes without causing widespread job losses.
So far, central bankers have left the door open for another potential interest rate hike in September, considering that more progress needs to be made in combating inflation. However, the latest job-related figures have not definitively confirmed their decision in either direction.
This is partly because officials will have new data on inflation before their next meeting on September 19-20. The Federal Reserve has long stated that it needs to see months of data on inflation and the labor market to assess whether encouraging trends will continue - rather than reacting to individual reports.
Federal Reserve Chairman Jerome Powell reiterated last week that the central bank is determined. To achieve its inflation target, the labor market must weaken and the economy must slow down, Powell said. (In the September meeting, policymakers will issue new forecasts for how high the labor market will rise and how low economic growth will be amid high interest rates.)
"We will need price stability to achieve a sustained period of strong labor market conditions that benefit everyone," Powell said in a famous speech last week.
Government data also indicates that fewer workers are leaving their jobs in industries experiencing high burnout rates, even those that are still growing like healthcare, hospitality, and entertainment, which faced severe labor shortages during the coronavirus pandemic.
"Employers who have struggled to hire for years now don't necessarily have people to lay off, but they'll slow down hiring," said Rachel Sederberg, chief economist at "Lightcast," a labor market analytics company. "Things are returning to reasonable levels. We're not spending as much on services."
Kerry Wilson, a registered cardiac nurse in Asheville, North Carolina, considered quitting her job during the pandemic due to low wages and labor shortages. Inflation weighed heavily on her family, making it impossible to save money or even afford her son's school sports costs or summer vacations.
But last year, Wilson, 36, received a $9-an-hour pay increase, negotiated by her union, bringing her up to approximately $40 an hour. This summer, she had the pleasure of taking two beach vacations. She and her husband can now comfortably drive without worrying about running out of gas money. Additionally, her son can participate in three sports leagues this year.
"I am genuinely able to enjoy life now," Wilson expressed. "This pay increase has made a significant difference as my husband was able to explore other job opportunities, providing us with a bit more financial flexibility."
Simultaneously, she noted that morale at work has significantly improved. Several hospital staff members who left during the pandemic in search of more lucrative options have returned to her hospital.
