More gradual cooling in labor market brings economy closer to ‘soft landing’

Job additions are slowing but stable; wage growth eases but still exceeds target range

Employers added 187,000 jobs in August as the job market continued on a steady but slowing trajectory, according to new data from the U.S. Bureau of Labor Statistics.

The number of job additions remains healthy and beat expectations, with estimates from outlets like Reuters and Bloomberg predicting an increase of 170,000 jobs. Additions from June and July saw downward revisions of a combined 110,000 jobs, bringing the three-month average of gains down to 150,000.

Increases were broad-based, with strong bumps in health care (which added 71,000 jobs), and leisure and hospitality (which added 40,000). Construction employment remained on the upswing as 22,000 jobs were added, exceeding the average monthly gain (17,000) in the sector over the past 12 months.

Additionally, some of the more notable backtracks in August were driven by specific events. The decline of 34,000 jobs in transportation, for example, was fueled in large part by the shutdown of longtime trucking giant Yellow Freight early in the month, while information employment declined by 15,000 due largely to the ongoing writers’ and actors’ strikes in Hollywood.

Meanwhile, the national unemployment rate jumped to 3.8%, an unexpected development that brought the metric to its highest level since the Federal Reserve’s aggressive interest rate-raising policy began in March of last year. The uptick in the jobless rate, however, was attributable to a surge in labor participation, which grew to a recent peak of 62.8%. Participation among those of prime working age (25 to 54 years old), in particular, matched its June level to hit a 21-year peak.

Average hourly earnings rose by 0.2% in August, up 4.3% year over year. That’s in line with expectations and continued a recent cooldown as last month’s increase was the smallest since February 2022. Yearly earnings growth still exceeds 3.5%, the pace that many experts believe is consistent with the Fed’s target inflation rate of 2%. But all things considered, many observers see the latest jobs report as another sign that a “soft landing” may be realized.

“August’s jobs report is signaling that the labor market is solid but slowing,” said Odeta Kushi, deputy chief economist at First American Financial Corp. “Unemployment did increase, but it was for mostly the ’right’ reason: more labor supply. Labor demand is cooling, labor supply increased and wage growth is gradually moderating. Cooling is good from the perspective of the Federal Reserve.”


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