Last month, the Bureau of Labor Statistics released a jobs report Which only Baby Bear can offer: not too hot, not too cold, but just right.
The US economy added 187 thousand jobs in July. While that number was well below the rapid pace of job growth over the past three years, it was roughly in line with the monthly average seen in the decade before the pandemic.
The unemployment rate has stabilized at 3.5%. The unemployment rate has drifted quietly between 3.4% and 3.7% since March 2022, the month the Fed began an aggressive anti-inflation campaign that was fully expected to slow demand and push the unemployment rate above 4%, if not It was close to 5%.
The August jobs report, due Friday at 8:30 a.m. ET, is expected to show that the labor market will remain in that sweet spot. Consensus estimates point to a net job gain of 170,000 jobs and the unemployment rate stable at 3.5%, according to Refinitiv.
While there are still many concerns that job growth may slow too slow and turn negative, the current state of the economy – and recent history – supports the belief that this steady state can be maintained.
“We know from the experience of 2015, 2016, 2017, 2018, that the kinds of levels we’re seeing now in labor markets — the number of hours worked, the quit rates, the rate of job growth — those are the types of levels we’re seeing now in the labor markets — the number of hours worked, the quit rates, the rate of job growth — those are the types of levels we’re seeing now in labor markets,” said Julia Pollack, chief economist at online labor market ZipRecruiter. “This could go on for a very, very long time.” “These are really good, strong, sustainable numbers, leading to gradual growth in real wages, gradual increases in prime-age participation rates that gradually draw more people on and off the sidelines and expand the workforce and the base.” tax, which has all kinds of long-term benefits.”
She added: “We may be in a place where a ‘moderate’ job market is sustainable and lasts a long time; but there is also a significant risk that the porridge may cool too much.”
There are still concerns
The economy is still growing, but the pace of growth is moderate. Consumers are still spending, but credit card debt is increasing, delinquency cases are on the rise, and student loan payments are about to resume. Interest rates and mortgage rates are the highest in 22 years, and it is still an open question as to how long they will stay at this level or go higher. In addition, the growth of community bank loans has slowed, which is cause for concern — especially for small businesses, she said.
“I think it’s very unclear right now where we’re going,” Pollack said.
And the Fed wanted to see more sluggishness in the labor market in its fight to bring down inflation. An imbalance between supply and demand on the part of workers could lead to higher wages and, ultimately, add upward pressure on inflation. The central bank has tried to tame the high prices by raising interest rates in an attempt to pour cold water on demand.
“The biggest concern with the August report is that wage growth could be too fast, risking an acceleration of inflation,” Dean Baker, chief economist and co-founder of the Center for Economic and Policy Research, said in a commentary released Wednesday. . “This is likely to cause the Fed to raise interest rates further, which could lead to the recession that many forecasters have long predicted.”
He added that the annual rate of wage growth, measured by average hourly earnings, was 4.9% over the past three months. This is up from 3.4% during the first three months of the year.
Still, Tuesday’s Employment Survey and Employment Turnover report for July was music to Fed Chairman Jerome Powell’s ears: job opportunities fell to 8.83 million, the lowest level since March 2021; Hiring activity slowed; Fewer workers quit their jobs and layoffs went up.
“I expect an echo of the (JOLTS) report (on Friday), a slow cooling of the economy,” Rachel Cederberg, chief economist at labor market research and analytics firm Lightcast, told CNN.
Private payroll data released by ADP on Wednesday also showed a slowdown, with an estimated 177,000 private sector jobs added in August, a sharp decline after months of strong hiring.
“Job opportunities are declining, and American workers are more reluctant to leave their jobs at this time,” Andrew Challenger, senior vice president of Challenger, Gray & Christmas, said in a statement Thursday. “The job market is resetting itself after the pandemic and the post-pandemic hiring frenzy.”
US employers announced plans to hire 7,744 workers, according to Challenger, Gray and Christmas data released Thursday morning. This is the lowest monthly total since November 2020.
In its latest monthly Challenger report, the outsourcing and executive training firm also reported that US companies announced 75,151 job cuts in August, a significant uptick from June and July, which saw 64,406 layoffs announced. However, the bulk of the cuts have occurred in the warehousing industry, spurred by the bankruptcy of trucking company Yellow, which has suspended operations and laid off 30,000 workers.
Nationally, unemployment claims remain well below pre-pandemic standards.
The number of Americans filing for unemployment benefits for the first time fell slightly last week to 228,000, according to data released Thursday by the Labor Department.
Initial claims for the week ending August 26 were just below the previous week’s level, which was revised to 232,000.
In the decade before the pandemic, weekly claims for unemployment benefits averaged 311,000, according to Labor Department data.
Continuing claims, filed by people who have received unemployment benefits for more than a week, reached 1.725 million for the week ending Aug. 19, which was 0.1% more than the previous week’s level of 1.697 million.
Economists had expected 235,000 initial claims and 1.703 million continuing claims, according to Refinitiv.