US Job Growth Is Cooling Off

The Numbers Game

The U.S. job market added 187,000 jobs in August, an uptick from July’s 157,000 jobs added, showing that the labor market is still chugging along albeit at a slower rate. Case in point, the number of jobs added between June and August totalled only 449,000, the lowest level in three years.

The state of the labor market has implications for the Federal Reserve, whose job it is to keep unemployment and inflation in check. With much focus on the latter, the job market has cooled off quite a bit.

Slowdown Showdown

Slowing job growth sounds scary, but it’s not quite the alarm bell it sounds like. Even as the unemployment rate rose to 3.8% in August from 3.5% in July, it remains in close range to the historic low.

In fact, the August increase came on the coattails of more people entering the job market — 736,000 to be exact. That’s the highest level since January and a good sign for the economy. So, while the pace of hiring has moderated, the proportion of Americans either working or actively seeking work has reached 62.8%, the highest since the pre-pandemic days of February 2020.

In other words, people are optimistic enough to look for jobs, even if they don’t find one right away.

The Fed’s Tightrope

The Fed is walking a tightrope, trying to slow down the economy just enough to curb inflation but not so much that it causes a recession and discourages companies from hiring.

Between the pure size of the U.S. economy and the Fed’s blunt tool box of interest rate changes and monetary easing, the central bank’s job isn’t easy. But optimism about achieving a “soft landing” is gaining traction. The economy is growing at a slower and perhaps more sustainable pace than during the reopening boom of 2020.

Wage growth, which jumped in response to the pandemic labor shortage, has also eased, with average hourly pay rising only 0.2% from July to August.

If you’re job hunting, there’s definitely competition, but the state of the market overall isn’t bad. And if you’re the Federal Reserve, well, you’re probably breathing a small sigh of relief.

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