Despite widespread concerns and mixed signals throughout the economy, the labor market continues to add jobs at a steady pace. According to the Bureau of Labor Statistics, August saw the creation of 315,000 jobs, while the labor force participation rate ticked back up and erased its decline from the past few months.
So while this report’s job number is much cooler than the 526,000 in the previous report, and unemployment also ticked up from its record low in July, the labor market remains strong overall.
“Over the past two months, we’ve seen 800,000 jobs added. All in all, it is an encouraging report,” said Lightcast Senior Economist Ron Hetrick on the Lightcast live broadcast this morning. “But when combined with what we now know of job openings last month, it indicates that even though we are starting to fill jobs, employers are adding new ones. That is certainly not indicative of companies sensing a looming recession.”
Wages rose an average of 10 cents an hour in August, less than the 15-cent increase in June but still a large jump, especially because the Federal Reserve has raised interest rates aggressively over the past several months in an effort to curb inflation.
“This is a challenge for the Fed,” said Lightcast Senior Economist Elizabeth Crofoot. “It just gives the Fed that much more ammunition to be aggressive and keep raising interest rates.”
The JOLTS report the BLS released earlier this week shows that demand for workers is still very high, and the Federal Reserve wants that demand to cool in order to return the economy and job market to normal levels. However, the Fed may have already found the cooling they’re looking for, since job creation in August was so much lower than it was in July. The Fed will weigh a complex set of variables when it next meets to review interest rates later in September.
More promising is the rising labor force participation rate, which rose 0.3% to 62.4%. The large influx of individuals into the labor force corresponded to the unemployment rate ticking up (to 3.7%, up from its record low of 3.5% in July).
“The unemployment rate did tick up, but it was for the right reasons,” Crofoot said. “We had this huge increase in the labor force participation rate. It’s great to see that there are more people that are putting their name out there, applying for jobs and looking for work.”
While this report shows that thousands have returned to the labor force from the sidelines, the job market is still historically tight, and there is room for many, many more. In July, Crofoot published preliminary research on how “missing workers” face many challenges rejoining the labor force, including issues related to childcare, health, qualifications, and other obstacles that employers can help address. The JOLTS and Employment Situation reports this week show there continues to be a need for those workers.
“Earlier this week when the JOLTS report was released, we found that there are 5.6 million more openings than available workers. Today, we learned that there are exactly 5.6 million people that are not in the labor force who want to work,” Crofoot said. “There are still a lot of reasons that are hindering people from entering the workforce. This is definitely a challenge employers are going to have to face, but if they do, they will find the workers they need.”
Because the Covid-19 pandemic has been a primary factor shaping how those out of the workforce think about returning, the BLS’ supplemental household survey data on the pandemic is especially relevant. This report shows a steady decline in individuals reporting their work has been affected (those teleworking because of the pandemic is down to 6.5% this month, down from 7.1%, and 1.9 million reported the pandemic kept them from looking for work, down from 2.2 million).
More significantly, the BLS announced it will be asking new pandemic-related questions later this fall. The October report will include new data about who is working from home, and how much the practice has changed over the past several years.
Overall, this Employment Situation shows what could be a clear signal amid the economic noise of the past several months. Job growth is slowing but still high, labor force participation is rising but not enough to fully bridge the gap between worker supply and demand, and the unemployment rate is up from its record low, but consistently below historically normal levels.
For more first-take insight and analysis, visit the Lightcast LinkedIn page to watch our economists’ live discussion right after the report released this morning.
