August US Jobs Report Suggests Gradual Hiring Slowdown as Economy Adjusts

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The overheated American labor market is gradually reverting to normal temperature.

According to a survey conducted by the data firm FactSet, the Labor Department is expected to report on Friday that U.S. employers — companies, nonprofits, and government agencies combined — added 170,000 jobs last month. This would be a decrease from the 187,000 employment added in July and the lowest monthly increase since December 2020.

Becky Frankiewicz, chief commercial officer at the employment agency ManpowerGroup, stated, “We are beginning to see a gradual decline in the labor market.” “Make no mistake: Demand is moderating.” However, this is not a freefall.

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Federal Reserve’s Delicate Balancing Act Amid Slowing Hiring and Inflation Concerns

The Federal Reserve, which has been attempting to tame inflation with a series of 11 interest rate increases, would embrace the latest indication that the rate of hiring is slowing without plunging into a full-scale recession. The Fed hopes to achieve a rare “soft landing,” in which it manages to reduce employment and growth sufficiently to curb inflation without triggering a recession in the world’s largest economy. Economists have long been skeptical of the success of Fed policymakers.

However, optimism has increased. Since reaching a high of 9.1% in June 2022, year-over-year inflation has consistently declined. The rate was 3.2% in July. But despite developing more slowly than during the prosperity that followed the pandemic recession of 2020, the economy has defied the pressure of rising borrowing costs. From April to June, the gross domestic product (the economy’s total output of commodities and services) increased at a respectable annual rate of 2.1%. Consumer spending continued, and business investment increased.

The Federal desires a slowdown in hiring because a high demand for labor tends to inflate wages and fuel inflation.

To date, the labor market has cooled in a relatively painless manner, with few redundancies. In August, the unemployment rate is anticipated to have remained at 3.5%, just above a 50-year low. And the Labor Department reported Thursday that the number of Americans applying for unemployment benefits, a proxy for layoffs, declined for the third consecutive week.

“Employers are reluctant to lose their current talent,” Frankiewicz stated.

In lieu of laying off workers, businesses are posting fewer job openings: 8.8 million in July, the lowest number since March 2021. And American employees are less likely to seek higher pay, benefits, and working conditions elsewhere. In July, 3,5 million people abandon their employment, the lowest number since February 2021. A slower rate of resignations tends to reduce the burden on businesses to increase pay in order to retain current employees and attract new ones.

The average hourly wage is not growing as quickly as it did last year. In March 2022, the average wage increased 5.9% from the previous year. They are anticipated to increase by 4.4% in August, the same as in July. Nancy Vanden Houten, the chief U.S. economist at Oxford Economics, remarked, however, that annual average pay increases must decelerate to approximately 3.5% in order to be consistent with the Fed’s inflation objective of 2%.

Nonetheless, economists and financial market analysts are increasingly of the opinion that the Fed may be finished raising interest rates. Nearly nine out of ten analysts polled by the CME Group anticipate that the Fed will leave interest rates unchanged at its next meeting on September 19-20.

Despite what appears to be a distinct trend toward slowing hiring, Friday’s employment report may become complex. Many teachers are abandoning temporary summer employment to return to the classroom, complicating the Labor Department’s efforts to modify hiring figures for seasonal fluctuations.

And it is believed that the closure of the large transportation company Yellow and the strike by Hollywood actors and writers capped August’s employment growth.

 

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Source: ABC News

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