Employers in the United States created 187,000 jobs in August, a sign of the strength of the labor market despite higher interest rates imposed by the Federal Reserve.
The figure marks an increase from the 157,000 jobs created in July and at the same time a slowdown in the rate of hiring from previous months. From June through August, the economy added 449,000 jobs, the lowest quarterly total in three years.
Friday’s Labor Department report showed the unemployment rate rose from 3.5% to 3.8%, the highest level since February 2022, although it remains historically low.
However, the rate rose for an encouraging reason: A sizable number of people-736,000-started looking for work last month, the most since January, and not all of them found jobs right away. Only those actively looking for a job are considered unemployed.
In fact, the proportion of Americans who have a job or are looking for one rose in August to 62.8%, the highest level since February 2020, before the COVID-19 pandemic hit the U.S. economy.
The slowdown in the labor market would help cool the economy and reassure the Fed that inflation will continue to decelerate. The streak of 11 interest rate hikes by the Fed has helped slow inflation from 9.1% last year to 3.1% today. Given signs that the slowdown in inflation will continue, many economists think the Fed may decide that further rate hikes are no longer necessary.
The Fed wants the supply of jobs to shrink because intense demand for workers tends to inflate wages and fuel inflation. The central bank hopes to achieve an unusual “soft landing” in which its interest rates manage to curb hiring, lending and spending enough to contain inflation without causing a deep recession.
Optimism about a soft landing has been growing. The economy, though growing more slowly than during the boom that followed the 2020 pandemic recession, has defied the pressure of rising borrowing costs. Gross domestic product-the economy’s total output of goods and services-rose at a respectable 2.1% y/y in the April-June quarter. Consumers continue to spend and businesses increased their investments.
So far, the labor market has cooled as painlessly as possible, with few layoffs. The Labor Department reported Thursday that the number of applications for unemployment benefits – a proxy for job cuts – fell for the third straight week.