August Non-Farmpayroll

US employers added a healthy number of jobs in August and a steady stream of people entering the workforce lifted the unemployment rate, suggesting some easing in the tight labor market and offering mixed implications for the Federal Reserve.

It’s taken 2 1/2 years but US employment is finally above its pre-pandemic level. A 315,000 gain in August payrolls from a month earlier pushed total employment to 152.744 million. That’s some 240,000 jobs more than in February 2020, when Covid-19 battered the economy and threw the labor market into a tailspin, Labor Department data showed Friday.

Nonfarm payrolls increased 315,000 last month following a revised 526,000 advance in July, a Labor Department report showed Friday. The unemployment rate unexpectedly rose to 3.7% as the participation rate climbed. Year-on-year growth in average hourly earnings was at 5.2%, the same as the prior month and slightly below the median estimate of economists.

The labor force participation rate -- the share of the population that is working or looking for work advanced to 62.4%. Labor force participation for Americans between the ages of 25 and 54 jumped to 82.8% last month from 82.4% in July, bringing it just shy of the Feb. 2020 level of 83%. Participation for younger Americans -those between the ages of 16 and 24 rose too, but at 55.7% is still some way from the pre-pandemic rate of 57%. For Americans of ages 55 and older, participation actually fell, to 38.6% well below the Feb. 2020 level of 40.3%.


 The jump in participation, which could lead to a further cooling in monthly wage growth, added to signs that inflation pressures are slowing. That’s welcome news for the Fed as it debates its next rate decision, and led traders to pare bets for a third-straight 75-basis-point hike after the report. It also puts more focus on consumer price data due ahead of the September policy meeting.

 The number of people not in the labor force who currently want a job fell by 361,000 in August the biggest decline in a year suggesting solid wage growth and high inflation are driving people to look for work. Other recent labor market data also paint a strong picture.


More labor supply may also have helped put downward pressure on wages: Average hourly earnings rose just 0.3% in August, marking the slowest pace of increase since February. A separate Labor Department report published earlier in the week showed the percentage of Americans who quit their private-sector jobs in July sank to the lowest level in over a year, which may be helping curb wage pressures too.

Jay Hatfield, chief executive officer at Infrastructure Capital Advisors: “The report was bullish for risk as the report was not too hot, average hourly earnings were lower than expected at 0.3% and labor participation rose. The Fed is the key driver of the market, and this report validates that inflation is cooling off, even though the backward-looking Fed is unlikely to acknowledge it in the near future.”

The number of available positions edged up to 11.2 million in the month topping all estimates from a revised 11 million in June, the Labor Department’s Job Openings and Labor Turnover Survey, or JOLTS, showed Tuesday. Vacancies have exceeded 11 million since late last year and the unemployment rate remains historically low, underscoring the strength of the US jobs market. The imbalance between labor demand and supply continues to drive robust wage growth that complicates Federal Reserve efforts to tamp down inflation.

Fed officials in June projected unemployment to rise to just 4.1% in 2024. Policymakers will issue a new set of forecasts at their meeting later this month. Treasury Secretary Janet Yellen, for her part, said on MSNBC, “I personally believe there is a path to accomplishing” a soft landing while terming it a “difficult” task.


“There’s a tendency to exaggerate how much higher participation will reduce inflation,” Summers told Bloomberg Television’s “Wall Street Week” with David Westin. “People think of it as extra labor supply, but they forget” about the rise in employment that increases incomes and therefore spending, in turn boosting demand for labor, he said. Ultimately, the US unemployment rate may need to surpass 6% from the 3.7% reported last month in order for the Federal Reserve to bring inflation back to its 2% target, said Summers, a Harvard University professor and paid contributor to Bloomberg Television. Summers reiterated that he’d be surprised if the Fed gets inflation to 2% “without an unemployment rate that approaches or exceeds 6%.”


Traders trimmed the amount of rate-hike premium priced in for the upcoming decision on Sept. 21 by 4 basis points to 63 basis points, suggesting relatively even odds of either a 75-basis-point or a 50-basis-point increase at the gathering. The expected peak for the Fed target this cycle was also trimmed by around 10 basis points to 3.86%, based on contracts linked to meeting dates.



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