A cyclist rides past a “We’re Hiring” sign posted on a storefront in San Gabriel, California, on August 21, 2024. U.S. employers added 142,000 jobs in August, while the unemployment rate fell to 4.2%.
FREDERIC J. BROWN/AFP via Getty Images/AFP
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FREDERIC J. BROWN/AFP via Getty Images/AFP
The latest monthly report on the US labor market was eagerly awaited as a comprehensive look at the health of the economy. Unfortunately, it provided a mixed picture that does not allow for clear conclusions about the current situation.
Overall, the data released Friday suggest that hiring has slowed from the start of the year, but not as sharply as some feared a month ago.
It’s a somewhat fuzzy combination that Federal Reserve policymakers will have to untangle when they decide how deep to cut interest rates later this month.
Here are four takeaways from the August jobs numbers.
Labor market appears stronger in August than previous month
U.S. employers added 142,000 jobs in August, a sharp increase from 89,000 jobs the previous month.
At the same time, the unemployment rate fell to 4.2%, a relief after the rate unexpectedly climbed to 4.3% in July, raising concerns about the job market and the broader economy.
Much of the increase in the unemployment rate in July was the result of temporary layoffs, and many of those people returned to work in August.
Last month, hiring was concentrated in hospitality (34,000 jobs), health care (31,000 jobs) and construction (34,000 jobs), while factories and retailers shed jobs.
But the labor market looks weaker in August than at the beginning of the year
Although employers created more jobs in August than in July, the overall pace of hiring slowed.
Last month’s job creation was about 30 percent below the average for the previous 12 months. In addition, job creation for June and July was revised down, totaling 86,000 jobs.
Those numbers are consistent with other reports, including one that showed a decline in job openings in July. And while the unemployment rate fell in August, it is still up half a percentage point from the beginning of the year.
Stock markets fell as investors viewed the glass as half empty, particularly after employers added fewer jobs than economists expected in August.
Wages are rising faster than prices
A slower job market than at the start of the year may not be encouraging news for job seekers, but for those currently employed, there was some good news: Average wages in August were up 3.8% from a year ago.
Wage increases have been outpacing inflation for more than a year now, and that trend likely continued last month. (August inflation figures will be released next week.)
This means that the real purchasing power of workers is increasing, helping to offset the sharp price increases of previous years.
No clear signal from the Federal Reserve
Unfortunately for policymakers, Friday’s mixed jobs report provides no clear signals on how to proceed.
The Fed has made clear that it plans to cut interest rates when policymakers meet on September 17-18, and the central bank is closely monitoring the labor market as it assesses how much it will actually need to cut.
But Friday’s report doesn’t provide much detail. The falling unemployment rate suggests the central bank may move slowly, cutting interest rates by a modest 0.25 percentage points.
But the downward revision to employment growth in June and July could suggest more aggressive action – perhaps a half-point rate cut.
That’s the challenge of “data addiction,” as Fed officials like to describe themselves. Sometimes the data points in different directions.
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