Despite economic predictions, 315,000 jobs were added in August. Increase in unemployment to 3.7%.
Hiring slowed sharply in August, but held steady as employers added 315,000 jobs, despite slower consumer spending, higher interest rates, and a sputtering economy.
The unemployment rate rose to 3.7% from 3.5%, the Labor Department reported Friday. That's because the labor force - the number of people working and looking for a job - rose by nearly 800,000.
Economists surveyed by Bloomberg had expected a gain of 300,000 jobs last month.
Job gains for June and July were revised downward by a combined 107,000, painting a slightly less booming picture of the labor market than previously thought. The change for July was small, so that month still showed a record gain of 526,000 jobs. But the revision means that the economy recovered all 22 million jobs lost to the pandemic in August, not July as originally thought.
"The job market we see today can no longer defy gravity and is falling back to earth," said Daniel Zhao, senior economist at Glassdoor, a leading job board.
Which sector has the biggest job growth?
Professional and business services led the increase in August with 68,000. Healthcare added 48,000 jobs, retail 44,000 and manufacturing 22,000.
Leisure and hospitality, which includes restaurants and bars hardest hit by the pandemic, posted a relatively modest gain of 31,000 jobs after adding an average of 90,000 in the first seven months of the year. The sector, which is struggling to find enough workers, is still 1.2 million jobs below its level before COVID.
One encouraging sign: The share of Americans working or looking for a job rose to 62.4% from 62.1%, matching the recent peak in March but still well below the pre-pandemic level of 63.4%.
This share had been rising as workers returned to the hot labor market after taking care of their children or remaining idle due to COVID -19 fears. However, it has generally declined in recent months, suggesting that widespread labor shortages may persist and wages may continue to rise. This would likely further fuel inflation, which is approaching a 40-year high.
In August, the average hourly wage rose 10 cents, leaving the annual increase unchanged at a still-high 5.2%.
The slowdown in job growth and the sharp increase in the labor force could help dampen inflation and prompt the Federal Reserve to raise its benchmark interest rate by half a percentage point this month instead of raising it by three quarter points for the third straight month, says Capital Economics economist Michael Pearce.
That prospect helped markets open higher Friday. The Dow Jones Industrial Average was up 130 points, or 0.4%, at 10 a.m. EST. The S&P 500 also rose 0.4%.
Many experts expected August to finally mark the beginning of a slowdown in wage growth as the U.S. has now made up for all the jobs lost to the pandemic. So far this year, the labor market has added an average of 438,000 jobs, edging out a contracting economy, rising inflation and mounting recession fears.
The ongoing labor shortage has kept many companies from downsizing and even led some firms to hire workers they do not need in the current shaky economy in anticipation of an eventual recovery.
And some industries, such as the restaurant industry, are still well below employment levels from before COVID and are struggling to catch up as Americans return to eating out, traveling and other activities in greater numbers. For now, robust employment numbers mean more household income and spending, keeping the economy out of recession, at least in the short term.
But most of the workers who were laid off in spring 2020 have been rehired, leaving less room for above-average job growth. In addition, the Federal Reserve's aggressive rate hikes to fight inflation are expected to eventually dampen hiring and business investment.
Moody's Analytics predicts that payroll growth will slow to about 100,000 per month by the end of the year. Some economists predict a recession by mid-2023.
Moody's Analytics predicts hiring will slow to about 100,000 per month by the end of the year. Some economists predict a recession by mid-2023.