The U.S. labor market added 315,000 jobs last month, hitting a 20-month streak in strong job growth that’s powering an economy through ominously high inflation.
The August jobs gains were far lower than the stellar July job growth, when half a million people found work. Still, the labor market remains an area of strength for the economy, especially as the Federal Reserve raises interest rates to rein in blistering inflation, which is weighing on the housing sector.
Financial markets initially traded higher on Friday’s jobs news, as investors hoped the strong but not-too-strong data might steer the Federal Reserve toward milder interest rate hikes. But the markets traded lower later in the day.
The report was welcome news to President Biden, who has struggled in the polls most of this year, with Americans frustrated by inflation being at 40-year highs. The jobs report combined with signs that inflation may have peaked could signal that the economy is on the road to stability.
“We received more good news in August,” Biden said in comments at the White House. “The great American jobs machine continues its comeback. American workers are back to work, earning more [in] manufacturing, building an economy from the bottom up and the middle out. With today’s news, we have now created nearly 10 million new jobs since I took office.”
Indeed, the economy has more than recovered the 20 million jobs lost during the pandemic.
The biggest gains were in professional and business services, which added 68,000 jobs last month, shooting past its pre-pandemic numbers. There was a big jobs boost in computer systems design, management and technical consulting, and architectural and engineering services, while legal services lost 9,000 positions. This growth helps quell chatter of a looming downturn, triggered by reports of layoffs this summer at tech and other blue chip companies such as Snapchat, 3M, T-Mobile and Bed Bath & Beyond.
Employment in health care rose by 48,000 jobs, with notable additions in doctors’ offices, hospitals, and nursing and residential-care facilities. Retail trade added 44,000 jobs, and manufacturing continued to trend up by 22,000 positions.
There was little change in leisure and hospitality after average monthly job gains of 90,000 in the first seven months of the year. The industry still remains below its pre-pandemic levels by 7 percent.
“We want an orderly cool-down and this was a Goldilocks report,” said Jeffrey Roach, chief economist at LPL Financial. “These job gains weren’t too hot or too cold. They’re hitting that softish landing we want to see.”
Average hourly wages increased by 10 cents, or 0.3 percent, for private-sector workers last month, to $32.36 an hour, a slowdown compared with previous monthly gains. Over the past year, average hourly wages have increased by 5.2 percent.
Ronnette Lark, 44, who works in housekeeping at the Harrah’s Casino in Atlantic City recently earned a $3-an-hour raise in her union contract, bringing her up to $19 an hour. Earlier this year, rising prices had forced her to cut snacks, beef and yogurt out of her budget, but the pay increase has meant that she can afford a larger variety of foods and to take her daughter out for summer activities.
“This raise means a lot,” Lark said. “It means I could take my daughter out to [amusement parks] and a Trolls concert in Philadelphia. It means this summer was better than last summer.”
The labor force participation rate also ticked up by 0.3 percent last month, to 62.4 percent, a sign that more Americans are looking to return to work. But that figure remains below its February 2020 levels, frustrating employers facing severe labor shortages.
“The jobs market is strong. One thing that jumps out from this jobs report is that we’ve seen an uptick in labor participation, too,” Labor Secretary Marty Walsh said. “People are going to ask: How long are these strong reports going to continue? If we can get more participation from that workforce, that will help us.”
Economists say the uptick in unemployment should not be a cause for concern given that stronger labor force participation could mean more workers are actively looking for jobs.
“We see labor force participation coming back and that’s a good thing,” said AnnElizabeth Konkel, senior economist at Indeed. “If we have increasing participation but not all people have a job yet, that means unemployment will rise. My assumption is these people back to participating will be able to find jobs quickly.”
And women workers between 25 and 54 joined the labor force at a particularly strong clip last month. Women in particular have faced challenges reentering the workforce since the pandemic because of increasingly inaccessible child care. The women’s workforce participation rate, however, still lags behind pre-pandemic levels.
“Prime-age women saw some of the biggest declines in workforce participation during the pandemic,” said Julia Pollak, chief economist at Indeed, noting that last month’s increase could be a sign that trend is reversing. “Many, many women throughout the country are on the margins between working and not working, and what they make at work barely covers child care that allows them to work, so often there’s no net benefit to them working.”
July’s report shocked economists, with the economy adding 528,000 jobs (although that figure was officially revised down to 526,000), more than double forecasters’ expectations. Last month’s more tempered report shows signs that the Fed is beginning to achieve that soft landing.
Meanwhile, other indicators, such as a decline in economic output and persistent higher prices for just about everything, paint a less rosy picture, raising questions about how much longer the hot job market can last.
These mixed signals have led some economists to predict that workers will eventually face a weaker job market, especially if there is a recession. And although inflation eased slightly while remaining high in July and workers have continued to see historic wage growth this summer, paychecks have not kept up with inflation, hitting low-income households the hardest.
Industries that are more sensitive to interest rate increases, including construction, durable goods production, mortgages and temporary help services, will see a decline in jobs first if the labor market weakens, economists say.
“When we stop seeing growth in those industries, that’s when you think the first shoe is beginning to drop. It hasn’t yet,” said Erica Groshen, an economics adviser at Cornell University and commissioner of the Bureau of Labor Statistics from 2013 to 2017.
The strength of the job market this year has emboldened the Fed to take aggressive action to fight inflation. Speaking in Jackson Hole, Wyo., last week, central bank Chair Jerome H. Powell said the Fed will not stop raising rates until inflation is more under control, though he expects that will probably soften the labor market and cause “some pain” for households and businesses.
Booming jobs creation also has meant fierce competition between employers for a limited labor supply. There continue to be roughly two open jobs for every job seeker, according to the July job openings report, and workers continued to quit their jobs at an elevated rate in July, in a phenomenon dubbed the “Great Resignation.”
Craig Woodling, 39, quit his job delivering packages for an Amazon contractor in Orlando last month. His co-workers had been quitting “left and right,” he said, and his manager was disappointed when he gave his notice.
“It was mostly heat and the expectations of how much Amazon wanted us to deliver,” Woodling said. He added that the number of packages he was delivering had surged to 400 a day during the pandemic, up from 220. “I’m about 40, at this point, so it’s wearing my body out.”
Woodling said he felt comfortable quitting his $18-an-hour delivery job because of a labor market with plentiful opportunities. Plus, his wife has a stable income. Now that he’s applying for jobs, he’s less certain that he’ll be able to quickly find another, particularly in the areas that he is looking: radio, his passion, or information technology.
“I thought it would be much easier to get a job once I quit, but that hasn’t been the case,” Woodling said. “Part of me wants to look for delivery jobs that I did before, but my wife keeps reminding me that you don’t want to get in that field again.”
The tight labor market, combined with high inflation, also has fostered an environment ripe for union activity, as workers struggling to pay for gas, food and housing have more power to make collective demands of employers facing widespread labor shortages. The National Labor Relations Board has reported a 56 percent uptick in petitions for union elections in the first nine months of fiscal 2022 compared with the prior year.