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Labor Market Showed Signs of Cooling in August
September 1, 2023
The American labor market remains resilient, especially by historic standards, but August’s numbers show signs of cooling, which would give the Federal Reserve room to pause additional rate hikes.
The economy added 187,000 jobs last month, according to the Labor Department, an increase from July’s downwardly revised gain of 157,000. In fact, both June and July’s figures saw sizable revisions. Combined, the month’s figures were 110,000 lower than initially reported. Between June and August, the economy added 449,000 jobs, the lowest three-month gain in three years.
The report also showed a notable upturn in the unemployment rate, climbing to 3.8% from 3.5% the month prior. While still low by historic standards, that is the highest the unemployment rate has been since February 2022.
The rise in the unemployment rate was due to a sizable number of people, 736,000, starting to look for work during the month. Only people actively looking for work are counted as unemployed. While it is a good sign that so many Americans are entering the workforce and the labor participation rate has risen to its highest level since the start of the pandemic, the fact that fewer are finding work is a sign of the slowing labor market.
Job openings fell to 8.83 million in July, the most recent month for which data is available. That is still well above where openings were prior to the pandemic, but it is the lowest level since March 2021. That equated to 1.5 openings for every worker the BLS counts as unemployed.
Average hourly earnings increased 0.2% for the month and 4.3% from a year ago. Both figures were lower than forecasters had expected, another welcome sign for the Fed that inflationary pressures are easing.
