- BLS report draws speculation about Federal Reserve action at September 18 meeting.
The U.S. labor market for August was a mixed bag, with job growth stalling, according to the Employment Situation Summary released by the Bureau of Labor Statistics (BLS) on Friday.
Even though 142,000 jobs were added, a trend below economists’ expectations of the average monthly gain of 202,000, or at least 161,000 jobs, the pace of hiring has sputtered, compared to earlier in the year. Economic uncertainty, higher interest rates, and supply chain disruptions are leading contributors to the weak report.
“The August jobs report isn’t as bad as feared, but it’s still pretty soft,” according to Vital Knowledge. “This release alone more than justifies the Fed going (down) 50 basis points on 9/18, not because the economy is crashing, but instead due to it being at a crucial inflection point, with the soft landing at risk of turning into something worse without policy support.”
Federal Reserve Chairman Jerome Powell said last month, “We don’t seek or welcome further cooling in labor market conditions. Overall, the economy continues to grow at a solid pace. But the inflation and labor market data show an evolving situation. The upside risks to inflation have diminished. And the downside risks to employment have increased. As we highlighted in our last statement, we’re attentive to the risks to both sides of our dual mandate.”
Seema Shah, chief global strategist at Principal Asset Management, told The Street that significant negative revisions to July’s already weak number, coupled with a softer-than-expected August number, countered the good news from the fall in the unemployment rate and rise in hours worked.
“For the Fed, the decision comes down to deciding which is the bigger risk: reigniting inflation pressures if they cut by 50 basis points or threatening recession if they only cut by 25 basis points,” she said.
Labor Force
In August, the unemployment rate remained steady at 4.3 percent, suggesting that while job creation has stalled, the overall labor market remains stable. The labor force participation rate remained unaffected at 62.7 percent.
However, the rate continues higher than pre-pandemic levels, signaling the labor market has not fully recovered.
Sectors adding to job gains include healthcare, construction, and transportation and warehousing. The healthcare sector is driven by the demands of an aging population. Increased government infrastructure spending and a strong housing market is driving construction employment. The transportation and warehousing sector’s growth reflects a rise in e-commerce and the demand for efficient supply chain management.
Of those unemployed, the number of people on temporary layoff declined by 190,000 to 872,000 in August, mostly offsetting the previous month’s increase.
Part-time workers, who preferred full-time employment, remained little changed at 4.8 million in August, up from 4.2 million a year earlier.
Average hourly wages for all employees rose by 0.3 percent in August, an increase of 4.2 percent over the last 12 months. While a positive sign for workers, the increase may contribute to inflationary pressures.
Labor costs remain the single most important problem for small business owners. One-third of them reported raising compensation in August. One in five plan to raise compensation in the next three months.
Small Business
The National Federation of Independent Businesses (NFIB) reported that in August, 40 percent of small business owners couldn’t find suitable employees. Labor quality – or lack of – is their primary concern.
“Owners have grown understandably frustrated as attempts to fill their workforce repeatedly stall and cost pressures continue to rise,” said NFIB Chief Economist Bill Dunkelberg.
NFIB State Director Leah Long said, “When small businesses struggle to find qualified workers, it affects their ability to serve their customers and contribute to the local economy.”
State-specific data was unavailable for this report, but the U.S. Bureau of Labor Statistics reported that Mississippi’s labor force participation rate has remained among the nation’s lowest for many years.
According to a report released last month by the National Strategic Planning & Analysis Research Center (NSPARC) at Mississippi State University (MSU), insights into the state’s labor market challenges include age (all age groups have seen a decline in labor force participation since 2010), education (the least likely people in the labor force are those who do not have a high school diploma), race (Hispanics had a higher-than-average rate of labor force participation), and gender (males experienced similar levels of decline).
Overall, 62 percent of small business owners reported hiring or trying to hire in August, while 56 percent (90 percent of those hiring or trying to hire) of owners reported few or no qualified applicants for the positions they were trying to fill.
Job openings were the highest in the transportation, construction, and manufacturing sectors, and the lowest in the agriculture and finance sectors. More than half of small business owners in construction (60 percent) had job openings they couldn’t fill.
Bottom line: The August 2024 jobs report emphasizes the complexities of the labor market. Even though positive signs of job growth and wage increases are emerging, challenges persist in achieving full employment and mitigating inflation.
Lynne Jeter
