Last month, the Bureau of Labor Statistics released its Employment Opportunities Report Only Baby Bear can deliver: not too hot, not too cold, but just right.
The US economy added 187,000 jobs in July. While that number was well below the fastest pace of job growth in the past three years, it was in line with the monthly average seen in the decade before the pandemic.
The unemployment rate fell again to 3.5%. The unemployment rate has quietly hovered between 3.4% and 3.7% since March 2022, a month when the Federal Reserve began an aggressive inflation fight that was expected to dampen demand and bring unemployment above 4% rather than near 5%.
The August jobs report, due out on Friday at 8:30 a.m. ET, is expected to have the labor market in its sweet spot. According to Refinitiv, consensus estimates put net job gains at 170,000 and the unemployment rate at 3.5%.
While concerns abound that job growth will become too slow and negative, the current state of the economy — and recent history — supports the belief that this steady state can be maintained.
“From the experience of 2015, ’16, ’17, ’18, the levels we’re seeing now in the labor market — the number of hours worked, the exit rates, the job growth rate — can be sustained for a very, very long time,” said the chief economist at online job marketplace ZipRecruiter. Julia Pollock said. “Those are really good, solid, stable numbers that lead to gradual real wage growth, gradual increases in prime-age participation rates, which gradually pull more people in and out, expanding the workforce and the tax base. Long-term benefits.”
He added: “We could be in a place where this ‘Goldilocks’ labor market is sustainable and will continue for a long time; but there are also substantial risks that the porridge could turn very cold.”
There are concerns
The economy is still growing, but the pace of that growth is moderate. Consumers are still spending, but credit card debt is rising, delinquency is rising, and student loan payments are about to resume. Interest rates and mortgage rates are at 22-year highs, and how long they will remain at this level or rise further is still an open question. In addition, loan growth at community banks has slowed, which is a cause for concern — especially for small businesses, he said.
“I think it’s not very clear where we’re going,” Pollock said.
The central bank wants to see more slack in the labor market in its battle to reduce inflation. A mismatch between labor demand and supply can push up wages and ultimately put upward pressure on inflation. The central bank tried to contain high prices by raising interest rates in an attempt to throw cold water on demand.
“The biggest concern with the August report is that wage growth will be too fast, leading to the risk of a rebound in inflation,” Dean Baker, senior economist and co-founder of the Center for Economic and Policy Research, said in commentary Wednesday. . “This could lead the central bank to raise interest rates further, which could bring about the recession long predicted by many forecasters.”
The annual rate of wage growth, measured by average hourly earnings, was 4.9% in the past three months, he said. This is up from 3.4% in the first three months of the year.
Tuesday’s jobs and labor turnover survey report for July may be music to Fed Chair Jerome Powell’s ears: Job openings fell to 8.83 million, the lowest since March 2021; Hiring activity slowed; Fewer workers left their jobs and layoffs rose.
“I’m looking forward to the reverberations of this [JOLTS] Report [on Friday]It’s slowly calming the economy,” Rachel Cederberg, senior economist at labor market research and analysis firm Lightcast, told CNN.
Private payrolls data released Wednesday by ADP showed a cooling, with 177,000 private sector jobs added in August, a sharp decline after months of strong hiring.
“Job opportunities are shrinking, and American workers are now reluctant to leave their positions,” Challenger, Gray & Christmas senior vice president Andrew Challenger said in a statement Thursday. “Job market resets after pandemic and post-pandemic hiring frenzy.”
U.S. employers announced plans to hire 7,744 workers, according to Challenger, Gray & Christmas data released Thursday morning. This is the lowest monthly amount since November 2020.
In its latest monthly Challenger report, the outplacement and executive coaching firm reported 75,151 job cuts in August, a significant increase from June and July, when a total of 64,406 layoffs were announced. Most of the cuts, however, occurred in the warehousing industry, driven by the bankruptcy of trucking company Yellow, which halted operations and laid off 30,000 workers.
Nationwide, jobless claims are well below pre-pandemic norms.
The number of Americans filing first-time claims for unemployment benefits fell by 228,000 last week, according to data released Thursday by the Labor Department.
Initial claims for the week ended August 26 were slightly lower than the previous week’s level, which was revised up to 232,000.
In the decade before the pandemic, weekly claims for unemployment benefits averaged 311,000, Labor Department data show.
Continuous claims filed by people who received unemployment benefits for more than a week totaled 1.725 million in the week ended Aug. 19, up 0.1% from 1.697 million the week before.
According to Refinitiv, economists expect 235,000 initial claims and 1.703 million ongoing claims.