US unemployment rate spikes to 3.8%
US job growth picked up in August, but the unemployment rate jumped to 3.8% and wage gains moderated, suggesting that labour market conditions were easing and cementing expectations that the Federal Reserve will not raise interest rates this month.
The closely watched employment report from the Labour Department on Friday also showed 736,000 people entered the job market last month, boosting the participation rate to the highest level in 3-1/2 years. Concerns about an economic slowdown are probably luring people back into the labour market.
The economy created 110,000 fewer jobs than previously reported in June and July, which some economists said suggested there had been business closures that were not previously captured. The report followed news this week that job openings dropped to the lowest level in nearly 2-1/2 years in July.
The labour market is slowing in response to the US central bank’s hefty rate hikes to cool demand in the economy. “This is probably the final nail in the coffin for the chances of another rate hike by the Fed in September,” said Christopher Rupkey, Chief Economist at FWDBONDS in New York.
Nonfarm payrolls increased by 187,000 jobs last month after rising by 157,000 in July. Job growth averaged 150,000 per month over the past three months, sharply down from 238,000 in the three months through May.
Economists polled by Reuters had forecast payrolls would increase by 170,000 jobs last month. Employment gains, however, remain well above the roughly 100,000 jobs per month needed to keep up with the increase in the working-age population. The share of industries adding jobs was the highest in seven months, indicating underlying strength in the labour market.
A strike by Hollywood actors resulted in a decrease of 17,000 jobs in the motion picture and sound recording industries last month. The bankruptcy of trucking firm Yellow in early August led to 37,000 job losses in the truck transportation industry. Without these one-time drags, payrolls would have increased by about 241,000 in August.
“This is still not the picture of the labour market we would expect to see if the economy were in danger of decelerating dramatically in the short term, although without question there are signs of moderation,” said Rick Rieder, Chief Investment Officer of global fixed income at BlackRock. Stocks on Wall Street were trading mostly lower after rising earlier. The dollar gained versus a basket of currencies. US Treasury yields rose.
Published in The Express Tribune, September 3rd, 2023.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.