The US economy added 315,000 new jobs in August 

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Image Source: NPR

The US added 315,000 new jobs in August, as the labor market remained strong despite signs of a deteriorating economy.

The US labor market lost 22 million jobs at the outbreak of the epidemic in early 2020 but rebounded after the Covid lockdowns were lifted. Despite four-decade-high rates of inflation and weakening economic development, it has remained strong. The United States surprisingly added 526,000 new jobs in July, restoring employment to pre-pandemic levels.

The unemployment rate rose from 3.5% in July to 3.7% in August but remains close to a 50-year low. According to the data, more people stepped off the sidelines in August and began hunting for new jobs.

Because of the outstanding strength of the labor market, the Federal Reserve is concerned that as firms fight for people, wage inflation will continue to drive up prices. In the last year, average hourly wages have climbed by 5.2%, more than the 3% annual growth rate prior to the pandemic but less than the 8.5% annual rate of inflation recorded in July.

The central bank has raised interest rates dramatically to slow the economy and lower prices.

Last week, Fed Chair Jerome Powell stated unequivocally that the Fed wants to keep hiking rates dramatically as the central bank tries to contain inflation. His statement sparked a Wall Street disaster, with the Dow Jones index dropping 1,000 points. The most recent jobs report is the final one before the Fed meets again in September.

According to Nancy Vanden Houten, head US economist at Oxford Economics, there is “much to appreciate in August’s job data,” but it is unlikely to influence Fed policy. In her statement to investors, she stated that while the Fed welcomes the little slowdown in employment growth in August, it will not prevent future significant rate hikes in the months ahead.

Earlier this week, White House press secretary Karine Jean-Pierre told reporters that the administration was “expecting job figures to ease off a bit” as the economy transitioned from the exceptional economic growth seen last year to more stable and steady development.

There are conflicting signs about the state of the labor market. For example, Ford and Walmart have announced major layoffs, and 50% of businesses questioned by PriceWaterhouseCoopers last month indicated they were reducing personnel or planned to do so.

Simultaneously, the government stated last week that there were 11.2 million available employment positions in July, with two postings for every unemployed individual. In addition, new unemployment benefits claims, a layoff barometer, fell to a two-month low last week.

The latest government job data comes on the heels of ADP’s monthly survey of private firms, the US’s largest payroll provider. According to ADP, private companies added only 132,000 new jobs in August, which is less than half of the number added in July.

What the analysts are saying about the new jobs

Economists predicted that the rate of monthly employment creation would decline, especially since the majority of the losses caused by the epidemic had been recovered. However, employers are still dealing with significant labor shortages, which means they must fight intensely to retain employees and hire new ones.

Data released earlier this week show that there are still around two vacancies for every unemployed worker, showing that the extraordinarily tight labor market is not relaxing.

As a result, wages have risen substantially across the country, raising fears about a feedback cycle in which corporations are forced to charge more for their products and services to cover these expenses, prompting workers to demand even greater pay.

Read Also: US economy added 528,000 jobs in a surprise gain 

In August, average hourly earnings went up by 0.3 percent for the month, or 5.2 percent on an annual basis.

Professional and commercial services employment climbed by 68,000, while healthcare employment increased by 48,000. Retail and manufacturing jobs increased as well, but leisure and hospitality jobs remained unchanged. The same may be said for the building and transportation industries.