Axios Macro

A white telescope

September 02, 2022

🥣 How about a "not-too-hot, not-too-cold" jobs report to lead you into the long weekend? We're here with an early edition of Macro to take you through the August payrolls report. Early clue: Fed officials may be breathing a sigh of relief.

Situational awareness: G7 finance ministers have agreed to back a price cap on Russian oil, they said this morning. It's a key step in the allies' strategy to keep oil flowing through the world economy without enriching Moscow in the process.

Today's newsletter, edited by Javier E. David, is 559 words, a 2-minute read.

1. This is the jobs report the Fed wanted

Data: Bureau of Labor Statistics; Chart: Axios Visuals

We're in a strange moment for economic data. Good is bad (a booming economy means the Federal Reserve will tighten the screws more). Bad is bad (nobody wants a recession).

Why it matters: The new data threads the macroeconomic needle, showing continued robustness in the labor market and a softening of inflationary pressures.

The details: It's not just one data point out of the 40-page report that supports this "Goldilocks" interpretation. It's many of them.

  • The 315,000 jobs added to employers' payrolls, plus revisions that subtracted 107,000 from the previous two months, show job growth adjusting toward a more sustainable, moderate rate. It has averaged 378,000 in the last three months, versus 539,000 in Q1.
  • The unemployment rate rose two ticks, to 3.7%, for good reasons. The number of people in the labor force rose by a whopping 786,000, but not all of those net new workers immediately found jobs. That's good news for anyone who thinks the job market has been too tight.
  • Average hourly earnings rose a moderate 0.3%, hardly a rate that will alarm those who fear an upward spiral of wages and prices.

State of play: This balanced labor report follows benign price readings for July. The first major August inflation reading is Consumer Price Index, due out Sept. 13. If it also points to a softening inflation trend, the Fed's next decision looks more interesting.

  • At its meeting concluding Sept. 21, Fed officials have indicated they will likely raise interest rates by either half a percentage point or 0.75 points.
  • It seemed as if the higher number were more likely, especially following chair Jerome Powell's tough-talking Jackson Hole speech last week.
  • But in light of the new jobs numbers, that looks like more of an open question, especially if August's CPI points to moderating inflation.

Yes, but: One month of data is not a trend. We have seen head fakes in employment and inflation figures before, and there is no guarantee that the recent shifts evident in July and August data will continue.

The bottom line: The goal for policymakers, both in the Biden administration and the Fed, is to achieve an economy that has rebalanced toward a more durable combination of stable growth, a good but not overheated job market and lower inflation.

  • For the moment, at least, things are pointing in that direction.

2. Women's recovery

Data: Bureau of Labor Statistics; Chart: Axios Visuals

Women workers hit a milestone last month: The proportion of employed prime-aged women (that is, between the ages of 25-54) is finally above the level seen before the pandemic.

  • Labor force participation rate in this cohort ticked up last month by a whopping 0.8 percentage points. Julia Coronado, founder of MacroPolicy Perspectives, suspects it could be tied to schools back-in-session, per a tweet.

Men haven't notched the same feat: The employment-population ratio for prime-aged men is roughly 0.7 percentage points below the February 2020 level.

🗓 Programming note: We'll be back in your inbox on Tuesday while we enjoy a day off for Labor Day.