US economy gained 315,000 jobs in August

US economy gained 315,000 jobs in August
US economy gained 315,000 jobs in August

The pace of job growth in the United States slowed in August after an unexpected acceleration the previous month and the unemployment rate rose, an encouraging sign for the Federal Reserve as it seeks to calm the economy.

The world’s largest economy added 315,000 jobs last month, just above economists’ forecasts. That compares to the downgraded 526,000 jobs created in July, which helped anchor the jobless rate to its lowest level in decades. The number of jobs added in June was also revised down to 293,000 from nearly 400,000.

Despite August’s gains, the unemployment rate edged up 0.2 percentage points to 3.7%. While the size of the labor force increased by 786,000, the number of unemployed increased by 344,000. With more people employed or looking for work, the participation rate rose to 62.4%, but remains below its pre-pandemic level.

The data, released Friday by the Bureau of Labor Statistics, underscores that the broader labor market remains robust, even as the Fed embarked on its most aggressive monetary tightening since the early 1980s.

Economists expect the monthly job growth rate to slow, especially as most of the losses caused by the coronavirus pandemic have been recovered. But employers are still grappling with widespread labor shortages, which means they must compete fiercely to retain workers and hire new ones.

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Data released earlier this week indicates that there are still around two vacancies per jobless worker, indicating little easing in the extremely tight labor market.

As such, wages across the country have risen sharply, raising concerns about a feedback loop in which companies are forced to charge more for their products and services to cover these expenses, leading workers to demand even higher wages.

Average hourly earnings rose again in August, with wages rising 0.3% for the month, or 5.2% on an annual basis.

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Employment in professional and business services increased by 68,000 and employment in health care increased by 48,000. Jobs in retail trade and manufacturing also increased, while those in leisure and hospitality sectors have changed little. The same was true for the construction and transport sectors.

For US central bankers, the labor market will have to cool much more if they want to reverse their monetary policy tightening plans.

Faced with the worst inflation in four decades, the Fed is wondering how far to raise interest rates and for how long to keep them at a level that actively restricts economic activity.

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August jobs data helps indicate whether the Fed will make a third straight 0.75 percentage point hike at its policy meeting later this month, or move to half-a-half increases. point. In just four months, the target range for the fed funds rate has moved from near zero to between 2.25% and 2.50%.

Most officials see rates rising to at least 3.5% this year, with further increases expected next year.

In his most hawkish remarks to date, Chairman Jay Powell pledged last week that the central bank would “continue” until it restores price stability, admitting the process will likely involve an extended period of weaker growth, higher unemployment and “some pains” for households and businesses.

In financial markets, the yield on the two-year US Treasury note, which is sensitive to interest rate expectations, fell 0.09 percentage points to 3.43%, after trading at around 3.48% just before the release of employment data. Futures for the S&P 500 rose 0.9%

Additional reporting by Kate Duguid in New York

. economy gained jobs August

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