US employment slows in August, unemployment rises
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American employers curtailed hiring in August following an unexpected surge the previous month, and the unemployment rate nudged up.
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A hiring sign is displayed at a restaurant in Highland Park, Ill. (Nam Y. Huh / Associated Press)
US firms reduced hiring in August after an unexpected spike the previous month, and the unemployment rate nudged up, providing the central bank with some relief that its inflation-fighting measures are working, according to official data released Friday.
The Federal Reserve is closely monitoring the progress of the hot job market, looking for indications of relaxation as it attempts to chill the economy with hefty interest rate hikes in order to tamp down inflation, which has reached a 40-year high.
While salaries continued to grow, the unemployment rate rose as more employees entered the labor force, a favorable development that may allow the Fed to settle for a modest move later this month following two consecutive major rate hikes.
Read next: 'We're hiring': US faces unemployment, no one wants to work
Despite the slowing rate, job gains have pushed employment over the pre-pandemic level, according to the Labor Department's carefully monitored monthly report.
The US economy added 315,000 jobs last month, which was in line with economists' expectations following 526,000 hires in July, according to the report. It added that the unemployment rate has risen to 3.7 percent after falling to 3.5 percent the previous month.
However, wages continued to climb in August, as average hourly earnings increased another 10 cents, or 0.3 percent, to $32.36. Over the past 12 months, worker pay has increased by 5.2 percent.
#Inflation is hitting the #US hard as prices all around the world are peaking, but minority #Americans are suffering the most from the harsh economic situation. pic.twitter.com/b30b9oIo0D
— Al Mayadeen English (@MayadeenEnglish) August 10, 2022
Surging prices
Soaring prices, exacerbated by high energy prices as a result of the Ukraine war, as well as ongoing supply chain issues and Covid-lockdowns in China, have prompted the Fed to raise the benchmark borrowing rate four times this year, including two large 0.75 percentage point increases in June and July.
Read next: US consumer prices witness biggest jump in 40 years
However, the latest data "may tip the scale towards a 50-basis point rate hike" at the September 20-21 meeting, said Rubeela Farooqi of High-Frequency Economics. However, the next report on consumer price inflation also will be a key factor.
She added, "these data are not going to change the Fed's view that policy needs to move to a restrictive stance over coming months."
In July, there were more than 11 million job openings, or two for every job seeker.
US recession
The United States' GDP declined in the first two quarters of 2022, which is often seen as an indication of a recession, but the strong job market defies that description.
Companies have been facing labor scarcity for months, encouraging them to offer greater wages, and driving up prices. There are also indications that businesses are "hoarding" people, or retaining seasonal workers for fear of not being able to replace them later.
The majority of #Americans are worried about paying for housing in the coming year, as inflation drives prices through the roof. The #US is suffering from the repercussions of the western-led sanctions on #Russia. pic.twitter.com/BNRYF6nx9i
— Al Mayadeen English (@MayadeenEnglish) August 17, 2022
Fed officials have stated repeatedly that they will continue to raise interest rates in order to chill the economy, even if monthly data show some signs of improvement.
Last week, Fed Chair Jerome Powell emphasized this point at a conference in Jackson Hole, Wyoming, warning of "some pain to households and businesses" as well as a "softer labor market."
