Credit…Hiroko Masuike/The Recent York Times
Job growth slowed in August but stayed solid, suggesting that rising rates of interest and fear of a possible recession are leading firms to tug back on hiring — but that the labor market recovery stays resilient.
Employers added 315,000 jobs last month on a seasonally adjusted basis, the Labor Department said Friday. That was down from 526,000 in July, though it still represented a powerful pace of growth. The unemployment rate rose to three.7 percent.
Economists have been saying for months that job growth was prone to slow because the economy comes down from last yr’s vaccine-fueled boom and as higher borrowing costs make it harder for businesses to expand. As an alternative, the labor market remained red hot at the same time as other parts of the economy, comparable to the housing market, turned sharply lower. The information released Friday indicated the long-delayed slowdown may finally have begun.
Ordinarily, such a slowdown could be a worrying sign, especially at a time when forecasters are warning of a possible recession. But within the up-is-down world of the late-pandemic economy, a modest pullback in job growth could actually be excellent news, albeit not for everybody.
That’s because policymakers on the Federal Reserve consider that the job market is effectively overheated: With twice as many open jobs as job seekers, employers are competing for staff by pushing up wages and, ultimately, prices. The Fed is hoping that by raising rates of interest, it could cool off the job market enough to bring down inflation, but not by a lot that unemployment skyrockets.
“I believe stability could be very welcome immediately for the economy,” said Michelle Meyer, chief U.S. economist for Mastercard. “If we have now a glide path there, if we take these steps from 500,000 jobs to 300,000 to 200,000, that’s a greater end result than if we have now a dramatic shock where suddenly next month we have now negative job growth.”
There are signs the Fed’s plan could also be working. Job openings have fallen from their peak last spring, wage growth has ebbed, and fewer employees are quitting their jobs, an indication competition for staff can have eased somewhat. Yet layoffs, despite a number of high-profile announcements, have remained low, and employers have pared hiring plans, not abandoned them entirely.
“Yes, employer demand is cooling,” said AnnElizabeth Konkel, an economist on the profession site Indeed. “In some areas, it’s cooling a bit bit faster. But it surely’s still strong. It’s still robust.
Still, any cool-down may have consequences for staff, who’ve enjoyed rare leverage in recent months. If there are fewer open jobs and employers are less desperate to hire, firms might regain power, giving staff less room to demand raises, flexible schedules or other perks.