Sep 1, 2023 - Economy

August's hiring pace is steady, but not rip-roaring

Data: Axios calculations; Bureau of Labor Statistics; Chart: Axios Visuals
Data: Axios calculations; Bureau of Labor Statistics; Chart: Axios Visuals

The once-blistering U.S. job market looks to be going through the kind of gradual cooldown that Federal Reserve and Biden administration officials have been seeking.

Driving the news: The economy added 187,000 jobs in August. That's a steady pace of hiring, but certainly not the rip-roaring job creation that defined much of the pandemic recovery.

  • The unemployment rate rose to 3.8% from 3.5%, but for favorable reasons — more people seeking work.
  • Meanwhile, wage growth continued to cool, which will comfort the Fed that inflation will keep coming down.

Why it matters: Should these developments continue, inflation may continue receding in a way that allows for little pain for American workers — a vastly different outcome than the inflation battle in the 1970s and 80s.

  • It sets the stage for the Fed to hold off raising interest rates again at its next policy meeting that concludes Sept. 20.

Where it stands: Job gains in June and July were revised lower by a combined 110,000 jobs. With August, the average job gain over the past three months is about 150,000 — the smallest in two years.

  • As it happens, that is precisely the figure President Biden described last year as a goal (as White House economists noted with some apparent glee Friday).

Details: A look under the hood at the dynamics driving the unemployment rate jump was particularly benign, showing more people joined the labor force.

  • In August, 736,000 more Americans were part of the workforce — either working or looking for a job — the highest since January.
  • As a result, the labor force participation rate among prime-age workers (those aged 25-54) was 83.5% — returning to the highest in more than two decades.

The big picture: That surge in potential new workers should help even out the supply-demand imbalance in the job market that has the Fed on edge. A rush of new workers could help fulfill unmet staff needs.

What they're saying: "The labor market has hit a sustainable, cruising altitude," Julia Pollak, chief economist at ZipRecruiter, tells Axios.

  • "The rate of jobs growth is high enough to continue to create opportunity for workers to join the labor force, but low enough to not cause a resurgence in inflation," Pollak says.

Wages also showed signs of cooling: Average hourly earnings increased by 0.2%, the smallest monthly gain since February 2022.

  • Even with that slowdown, wages are growing in real terms: Average hourly earnings are up 4.3% from a year ago. We don't yet have inflation figures for August, but that will likely outpace inflation over the same period.

Of note: There is evidence that ongoing Hollywood strikes are weighing on the labor market — even if only slightly: Employment in the motion picture and sound recording industries fell by 17,000, reflecting strike activity, the government said.

The bottom line: Summer is nearing its end, and the weather isn't the only thing cooling down.

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