SEPTEMBER 5, 2023 – JOB GROWTH SLOWS IN OVER THE SUMMER
The labor market has started to cool as the effects of higher interest rates are beginning to affect the economy. A robust 187,000 new jobs were added in August, yet the July jobs number was revised down by 30,000 to 157,000 while June’s number fell by 80,000 to 105,000. The unemployment rate rose from 3.5 percent in July to 3.8 percent in August. The slowing trend will give the Fed the room to keep rates steady at their meeting on September 19-20, but allows for the possibility of another rate rise in November or December.
On a three-month basis, the US economy added 150,000 jobs per month between June and August, while it added an average of 238,000 jobs/month for March to May. There has been some softening, yet the job market is still tight. Average hourly wages were up 4.3 percent year-over-year, down from 4.4 percent in July, but well above the wage gains experienced before Covid.
The Fed says it will raise rates if the economy does not slow enough to indicate inflation is declining, and if the labor market rebalancing remains incomplete. The market is anticipating 4 percent annual growth rate for this quarter, well ahead of the 2.1 percent seen in Q2. Wage gains are now outpacing inflation, lifting purchasing power which is driving the growth. Any rate cuts are still far off as the economy remains steady.