Employment report for August 2022:
Nonfarm payrolls rose solidly in August amid an otherwise slowing economy, while the unemployment rate rose as more workers returned to the workforce, the Bureau of Labor Statistics reported Friday.
The economy added 315,000 jobs for the month, just below the Dow Jones estimate of 318,000. The unemployment rate rose to 3.7%, two-tenths of a percentage point higher than expected, mainly due to a rise in the labor force participation rate. A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for financial reasons rose to 7% from 6.7%.
Wages continued to rise, albeit somewhat less than expected. Average hourly earnings rose 0.3% for the month and 5.2% from a year ago, both 0.1 percentage points below estimates.
Professional and business services led wage gains with 68,000, followed by health care with 48,000 and retail trade with 44,000. Leisure and hospitality, which had been a leading sector in job recovery during the pandemic, rose by just 31,000 for the month after an average of 90,000 in the previous seven months of 2022.
Production increased by 22,000, financial activity increased by 17,000 and wholesale trade increased by 15,000.
The employment numbers pose a dilemma for a Federal Reserve trying to get inflation under control.
“This is a unique time period, where we still have a relatively tight labor market, where there is still job growth, but companies have started to announce hiring freezes, some companies have announced layoffs,” said Liz Ann Sonders, investment strategist. at Charles Schwab. “This could very well be a recession if you don’t see the kind of labor market carnage that you see in most recessions.”
Those wage and salary increases came amid soaring inflation and concerns over a slowing economy that posted negative GDP numbers in the first two quarters of the year, generally seen as a clear sign of recession.
Inflation is approaching its fastest pace in more than 40 years as a combination of an imbalance between supply and demand, massive stimulus from the Fed and Congress, and the war in Ukraine has sent the cost of living skyrocketing.
The Fed has been fighting the inflation problem with a series of rate hikes totaling 2.25 percentage points that are expected to continue into next year. In recent days, senior central bank figures have warned that they have no intention of backing down on their policy tightening measures and expect that even when they stop raising interest rates will remain high “for some time”.
A key channel through which the Fed looks for policy implications is the labor market. In addition to robust hiring, vacancies are outpacing job openings by a nearly 2-to-1 margin, depressing wages and creating a feedback loop that sends prices higher not only for gas and groceries, but also shelter costs and a host of other expenses.
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