U.S. employers added 162,000 jobs in August, well exceeding economists’ expectations and providing fresh evidence that the nation’s labor market is resilient.
The unemployment rate held steady at 4.1%, the Labor Department reported Friday, unchanged from July, when U.S. employers unexpectedly shed 23,000 jobs.
“August’s pick-up in payrolls looks like payback after two very weak months,” said Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, in a statement shared with Straight Arrow.
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In August, the economy gained jobs in food services and drinking places, as well as in local government and education.
But jobs were lost in the information industry, Friday’s report revealed.
Low-hire, low-fire economy
Friday’s jobs numbers provide further evidence of a broader pattern of a so-called “low-hire, low-fire” economy, in which employers have pulled back sharply on hiring while largely holding on to existing workers.
Job openings stood at about 7.3 million in July, according to a separate Labor Department report, the monthly Job Openings and Labor Turnover Survey or JOLTS, released Tuesday. That was the equivalent of roughly 1.05 available jobs for every unemployed worker.
But actual hiring fell slightly to about 5.1 million, a sign that employers have grown more cautious about bringing on new workers.
Employment data released Wednesday by payroll processor ADP estimated that private employers added just 38,000 jobs in August, another signal of subdued hiring.
Meanwhile, layoffs remained relatively low as well, changing little at 1.7 million in July, according to JOLTS.
Eyes on the Fed
Friday’s numbers come at an especially consequential moment for the Federal Reserve, as it considers an interest rate hike at its next meeting on Sept. 15 and16.
The Fed left its benchmark rate unchanged at 3.5% to 3.75% in July, although three policymakers dissented and favored a quarter-point increase.
The central bank is weighing two competing risks: a cooling labor market and U.S. inflation that currently stands at 3.7% or 3.4%, by two separate measures, both of which are well above the Fed’s 2% target.
Friday’s stronger-than-expected jobs report could bolster the case for a rate increase if inflation remains elevated, because it suggests the economy can withstand tighter monetary policy.
The report also showed that average hourly earnings rose 0.3 % from July, to $37.75, and 3.1% from a year earlier.
Wage growth is welcome news for workers, but it could drive up inflation and further steer the Fed toward a rate increase. Slower wage growth would have signaled an easing of labor costs and weakened the case for a rate hike.
“The labor market remains a source of muted inflation pressure,” wrote Tombs.
“The upshot of today’s numbers,” he wrote, is that the Fed’s next move “remains finely balanced.”
The Fed will get more critical data Thursday and Friday of next week, when the Labor Department releases producer price figures and consumer inflation figures, just days before policymakers begin their two-day meeting.
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