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US employment growth solid in Aug.Labor market pressures are beginning to ease

  • Nonfarm payrolls increased by 315,000 in August
  • Unemployment rises to 3.7% from 3.5% in July
  • Average hourly wages will increase by 0.3%. +5.2% YoY
  • Average working hours per week decreased from 34.6 hours to 34.5 hours

WASHINGTON (Reuters) – U.S. employers hired more workers than expected in August, but modest wage growth and a rise in the unemployment rate to 3.7% suggest the labor market is starting to loosen There is growing cautious optimism that the Federal Reserve could slow the economy without triggering a recession.

The Labor Department’s closely monitored jobs report on Friday showed jobs created in June and July were 107,000 fewer than originally estimated, with the U.S. central bank down a third 75 basis points or 0.5 percent. It was not possible to conclusively resolve the debate over whether to provide a point rate hike at this month’s policy meeting.

The unemployment rate soared to its highest level in six months as nearly 800,000 people entered the labor market and the size of the labor force reached a record high. Despite a contraction in gross domestic product in the first half of 2022, the labor market remains strong, underscoring the resilience of the economy.

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“Job gains provide a new challenge to the idea that the economy is already in recession,” said Michael Feroli, chief U.S. economist at JPMorgan in New York. I remain hopeful that there is still the possibility of

A business survey showed nonfarm payrolls rose by 315,000 last month, after a jump of 526,000 in July. August marked his 20th straight month of job growth. Employment is now 240,000 above pre-pandemic levels.

Economists surveyed by Reuters had forecast an increase of 300,000 jobs, with estimates ranging from a low of 75,000 to a high of 450,000.

Some economists cautioned against reading too much into slowing employment growth in August, noting that the response rate to facility surveys last month was the lowest since 2006.

The first August payroll numbers tended to be revised significantly higher.

“The average upward revision between the first and third estimates over the past five years is nearly 120,000,” said Ryan Sweet, senior economist at Moody’s Analytics in Westchester, Pennsylvania. “Therefore, August employment growth may be stronger than originally expected.”

A strong increase in employment last month was led by the professional and business services industry, which added 68,000 jobs. Health care employment has increased by 48,000.

Employment in the retail sector increased by 44,000 and manufacturing increased by 22,000. Employment in the construction industry increased by 16,000.

Leisure and hospitality employment increased by 31,000, down from a monthly average of 90,000 in the first seven months of the year. Employment in the leisure and hospitality industry remains 1.2 million below pre-pandemic levels.

Salaries in the non-farm sector

Last week, Fed Chairman Jerome Powell warned Americans of a painful time of slowing economic growth and rising unemployment as central banks aggressively tighten monetary policy to keep inflation in check. .

The Fed raised rates by three-quarters of a percentage point twice in June and July. Since March, it has raised its rate from near zero to its current range of 2.25% to 2.50%. According to the CME’s FedWatch Tool, financial markets are pricing in about a 58.0% chance of a 75 basis point rate hike at his Fed’s September 20-21 policy meeting. This is down from 70% before the employment report was released.

August consumer price data, due mid-month, will also be a key factor in determining the size of the next rate hike.

Wall Street stocks were trading high. The dollar fell against a basket of currencies. US Treasury prices rose.

rising labor force

The unemployment rate rose to 3.7% from 3.5% in July before the pandemic, as 786,000 people joined the workforce. The biggest increase since January brings the size of the workforce to a record high, surpassing the all-time record set in December 2019.

As a result, the labor force participation rate, the percentage of working-age Americans who have or are looking for work, increased from 62.1% in July to 62.4%. It remains one point below its pre-pandemic level.

Participation in the labor market

A sustained increase in the labor pool would help reduce the gap between labor demand and supply. At the end of July, he had 11.2 million job openings, or two job openings for every unemployed person.

“This is a pressure relief valve that will help the Fed bring down inflation and achieve a soft landing,” said Yung-Yu Ma, chief investment strategist at BMO Wealth Management in Dallas.

But some economists are skeptical that the labor pool will continue to expand, citing the August surge as a result of seasonal factors and increased participation of workers in their prime.

Participation rates for this cohort are now higher than the 2019 average rate.

“We expect the downward unemployment trend to resume in September,” said Conrad Dequadros, senior economic adviser at Breen Capital in New York.

Wage growth slowed, with average hourly earnings up 0.3% after rising 0.5% in July. That took him to 5.2% annual wage growth in August. With strong wage growth, the income side of the economic growth register continues to expand, albeit at a moderate pace, and a recession has been halted for now.

Average weekly hours worked decreased from 34.6 hours in July to 34.5 hours.

The number of people working part-time for financial reasons increased to 4.1 million from 3.9 million in July.

underemployment

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Reported by Lucia Mutikani.Editing: Chiju Nomiyama, Andrea Ricci

Our standards: Thomson Reuters Trust Principles.

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