The latest U.S. jobs report indicates a slight increase in hiring for August compared to July, with an addition of 142,000 jobs, as announced by the Labor Department. This marks an improvement from July’s weak figure of 89,000 jobs added. The unemployment rate also fell from 4.3% to 4.2%, the first decline since March. However, revisions to prior months reflect that hiring in June and July was weaker than initially thought, with a collective loss of 86,000 jobs.
These job figures highlight the ongoing economic pressures that may influence the Federal Reserve’s decision to lower interest rates in its upcoming meeting on September 17-18, especially as inflation gradually returns to the target of 2%. The uncertainty surrounding the extent of the rate cut—the central bank may opt for a conventional quarter-point reduction or a more significant half-point cut—has become a focal point.
The data suggests that while the job market is slowing under rising interest rates, it continues to show growth. Many businesses seem cautious about expanding their workforce due to uncertainties regarding the upcoming presidential election and the Fed’s monetary policy direction.
Economic analyst Daniel Zhao from Glassdoor pointed out that the results from the August report reveal a cooling demand for labor, as more individuals are taking part-time positions while seeking full-time employment, a trend that has persisted for a year.
While overall layoffs are at historically low levels, the challenges in securing jobs have increased as hiring has slowed. The average job creation rate over the past three months fell to 116,000 per month from 211,000 a year earlier. Hiring was strongest in specific sectors: healthcare added 44,000 jobs, accommodations and food services saw a gain of 46,000 jobs, and construction added 34,000 positions. This strong performance in hospitality may reflect increased consumer spending, which has also risen when adjusted for inflation.
Federal Reserve Chair Jerome Powell previously expressed confidence that the Fed has largely managed inflation through higher interest rates, while aiming to avoid further weakening the job market. The central bank is striving for a “soft landing,” reducing inflation from its prior high of 9.1% in 2022 without triggering a recession. A lower Fed benchmark rate would eventually make borrowing cheaper across various consumer and business loans.
Currently, companies are listing fewer job openings, and employees are less inclined to leave jobs now compared to the post-pandemic recovery period when the job market was strong. Fewer resignations typically lead to a tighter job market for job seekers.
Becky Frankiewicz, president of ManpowerGroup North America, noted that many employers are hesitating to make new investments or adjust hiring practices as they await election outcomes and further Fed announcements. She characterized the job market as stable but lacking rapid growth.
A diminished hiring pace can signal potential layoffs, prompting the Fed to prioritize job market health over ongoing inflation control. The importance of the jobs report is underscored by mixed recent economic data, as it provides a comprehensive view of the economic landscape, derived from surveys of a diverse array of businesses and households.
Moreover, the Fed’s Beige Book reported a noted pickiness among employers concerning hiring, and a Conference Board survey in August indicated a growing belief among Americans that jobs are becoming harder to find, which could predict rising unemployment rates.
Despite these challenges, consumer spending and economic growth remain robust, with an annual growth rate of 3% reported for the April-June quarter. Federal Reserve Governor Christopher Waller is scheduled to speak later, which may shed further light on the economic outlook and potential Fed actions. Experts suggest that significant rate cuts could encourage companies to accelerate hiring.