The hiring pace of American employers increased in August after a sluggish July. In addition, the unemployment rate dropped for the first since March. This is a sign that although the job market has cooled down, it remains strong.
The Labor Department announced Friday that employers added 142,000 new jobs in July, compared to just 89,000. The Labor Department announced Friday that the unemployment rate dropped to 4.2%, down from 4.3%. This was the highest level for nearly three years.
The figures released on Friday show a slowing job market, despite high interest rates. Employers are responding to consumers who, despite inflation, increased their spending in July. In a survey of companies in the service sector, such as banks, restaurants, and health care providers that provide services, both sales and hiring rose.
The labor market has reached a new level: jobholders have a high degree of security, and layoffs are low historically. Yet, with hiring slowing down, it is harder to find a job.
The Fed can now cut its main interest rate, which has been at a 23-year peak, as inflation continues to fall. The central bank is likely to announce a rate cut of a quarter point when it meets again on September 17-18, based on the report released Friday.
Jerome Powell, the Fed Chair, said in a speech he gave last month that high interest rates had almost tamed inflation and they didn’t want the job market to deteriorate further. The central bank wants to achieve a soft landing, where it can bring inflation from its peak of 9.1% in 2022 down to the target level without creating a recession. Lower Fed benchmark rates will eventually lead to lower borrowing costs on a variety of consumer and business loan products, such as mortgages, auto, and credit card loans.
Companies are currently posting fewer openings for jobs and are adding fewer employees. Americans are also less likely to leave their jobs than they were shortly after the economic recovery from the pandemic. Workers are more likely in a strong market to leave their jobs, often for better-paying positions. The decline in quits means that fewer jobs will be available for those who are out of work.
Becky Frankiewicz is the North American President of ManpowerGroup. She said that the uncertainty surrounding the presidential election, and the Fed’s future moves, are causing companies to delay new investments and hiring.
She said, “The whole world is waiting to see how our election turns out.” We have to play this waiting game. “No one is ready to move forward yet.”
Frankiewicz stated that the job market is stable at this time.
She said, “The bottom’s not falling out and we aren’t seeing a rocketship, it’s stability.”
Slower hiring can often be a sign of layoffs. This is why Fed policymakers now focus more on maintaining the health of the labor market rather than continuing to combat inflation.
The recent economic data have been mixed. This has increased the importance of the Jobs Report, one of the most comprehensive economic snapshots that the government releases. To compile employment data, the Labor Department surveys approximately 119,000 businesses, government agencies, and households every month.
In the Fed’s Beige Book – a collection of anecdotes gathered from 12 regional Fed banks – it was reported that employers were becoming more selective in hiring new employees during July and August. A survey conducted by the Conference Board found that Americans are increasingly expressing concern about finding a job. This trend is often associated with higher unemployment rates.
In July, consumer spending, which is the main driver of the US economy, grew at a healthy rate. The economy grew by a solid 3% annually in the quarter April-June.
Christopher Waller will speak at Notre Dame University on Friday evening. He is a member of the Fed’s Board of Governors. Waller is an influential member of the governing board and may give insight into the Fed’s future moves.
Some labor market experts believe that the Fed’s rate reductions could prompt some companies to hire more quickly.
