The US jobs market is holding steady as interest rates sit at a 22-year high, with US employers adding 187,000 jobs in August, according to the Bureau of Labor Statistics (BLS).
The number of new jobs added in August is the same as the number of new jobs in July, showing that the labor market, down to levels seen before the pandemic, is resilient even with high interest rates.
President Biden on Friday afternoon touted August’s jobs figures, as they came in above economists’ expectations, which was pegged closer to 170,000 new jobs.
“As we head into Labor Day, we ought to take a step back and take note of the fact that America’s now in one of the strongest job-creating periods in our history,” Biden said. “Some experts said to get inflation under control, we needed higher unemployment and lower wages, but I’ve never thought that was the problem.”
The Federal Reserve is closely monitoring the jobs market and other indicators that point to whether the economy is slowing down and inflation is dropping toward their target level. The Fed in July raised interest rates for the 11th time in under two years, bringing rates up to a range of 5.25% to 5.5%, making mortgage rates and other loans more expensive.
Even at the beginning of this year, employers were adding as many as 517,000 jobs a month, as seen in February. But over the last few months, the number of new jobs has started to slow.
In August, the unemployment rate was 3.8%, the highest it’s been in over a year. The unemployment rate has been holding relatively steady over the last year, reaching a record low of 3.4% in February and then coming down again during the spring and summer.
The healthcare, leisure and hospitality and social assistance industries have continued to see job growth in August, while transportation and warehousing lost a good chunk of jobs, largely because of the bankruptcy of the trucking company Yellow. About 30,000 employees from the company were laid off as a result of the company’s closing.
Other recent data has pointed to easing in the labor market, including BLS’s Job Openings and Labor Turnover Survey (Jolts), which showed there were 8.8m job openings in July, 338,000 fewer than in June. There were 1.5 job openings for every unemployed worker, according to the survey, the lowest rate since September 2021.
Payroll firm ADP also released data that showed the number of jobs added by private employers dropped 30,000 in August, down to 177,000 jobs. Challenger, Gray & Christmas, an outplacement firm, said in a report that US employers announced 75,151 layoffs in August, the highest level since 2020.
Fed officials have emphasized that their goal is to achieve a “soft landing”, to bring inflation – which reached a peak of 9.1% last summer – down to 2% without dramatically affecting the jobs market. So far, the drop in inflation, which was 3.3% in July, has not had as severe of an impact on the labor market, as some had feared. But officials say there is still some way to go to bring inflation down to 2%, and the full effects of their rate hikes have yet to be felt.
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Jerome Powell, the Fed chair, said in a closely watched speech on 25 August that the central bank’s fight against inflation would continue, and officials would “keep at it until the job is done”.
“It is the Fed’s job to bring inflation down to our 2% goal, and we will do so,” Powell said. “We have tightened policy significantly over the past year. Although inflation has moved down from its peak – a welcomed development – it remains too high.”
Complicating the picture for the Fed is that even as interest rates remain high, consumer spending has remained robust as people keep spending on things like concerts and vacations. The impact that a new, higher level of spending will have on prices remains unclear, especially as other sectors, like the housing market, are seeing contractions because of interest rates.
“We are navigating by the stars under cloudy skies,” Powell said.
