America had another month of solid job gains: The economy added 315,000 jobs in August, while the unemployment rate ticked up to 3.7% as more workers entered the labor force, the government said on Friday.
Why it matters: Employers continue to hire workers at a robust pace, even as the Federal Reserve raises interest rates swiftly to crush inflation.
Job growth eased from July’s breakneck pace, which were revised a tick higher to 528,000 jobs. Job growth in June was weaker than initially thought, downwardly revised by 100,000 to 293,000.
The August figures are roughly in line with economists’ expectations.
Details: Perhaps the most welcoming piece of news in the report is the influx of workers who entered the labor force last month. The labor force participation rate — the share of people working or looking for work — rose by 0.3 percentage points, after a string of monthly declines.
Average hourly earnings rose by 0.3%, a slowdown from the 0.5% rate in July.
The backdrop: The Fed has been bracing for some heat to come out of the labor market. It has raised interest rates at a historically rapid pace in a bid to squash elevated inflation. This report offers some good news as wage growth slowed — and more workers entered the workforce, helping ease the tightness in the labor market.
Higher rates work to slow demand by making it pricier for consumers and companies to borrow money, causing slower economic growth and, in turn, less price pressure.
“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” chair Jerome Powell said last week.
Interest rates are rising, inflation is lingering at four-decade highs, the economy appears to be slowing and experts fear a recession is on the way. But Americans are still quitting their jobs at near-record rates in the face of growing economic uncertainty.
The percentage of American workers who quit their jobs set a record earlier this year and has only dropped slightly as the economy slows from two years of torrid growth. After reaching 2.9 percent this spring, the quits rate dropped to 2.7 percent in July, according to data released Tuesday by the Labor Department.
The idea of quitting a job amid a period of increased cost of living and a dubious economic future may seem counterintuitive. But the labor market has remained stacked in favor of workers, who see ample opportunities to boost their earnings to supplant increased costs from inflation.
“Despite recent declines, job openings still outnumber unemployed workers by a sizable margin, illustrating just how tight the labor market remains,” wrote AnnElizabeth Konkel, an economist at Indeed Hiring Lab, in a Monday analysis.
There were roughly two open jobs for every unemployed American, according to Labor Department data, giving job seekers ample opportunities to find new jobs with better pay or working conditions. Businesses are still scrambling to find enough workers to keep up with consumer spending — which is well above pre-pandemic levels — from a workforce that remains smaller than it was before COVID-19.
“It seems possible that employer demand would need to cool significantly more before recruiters start to notice an easing in recruiting conditions,” Konkel wrote.
In other words, employers still have too many open jobs and not enough candidates to avoid boosting wages and other perks to find talent. And that means workers still have ample incentive to quit for a better-paying job, particularly with inflation still high.
Job seekers on Indeed.com are looking for ever-higher wages, Konkel explained. The number of Indeed users seeking jobs with a $20 per hour wage rose above those seeking $15 per hour in June 2022, and the number of jobseekers looking for $25 per hour is up 122 percent over the past 12 months.
Konkel attributed the spike in job seekers looking for more money to the steady increase in advertised wages and the inflation they’ve helped to feed.
“Once job seekers know it’s possible to attain a higher wage, their expectations may shift and act as a pull factor in searching for a higher dollar amount. In this case, the shift in job seeker expectations from searching for $15 to instead $20 is clear,” Konkel explained.
“On the flip side, inflation continues to take a bite out of workers’ paychecks,” she continued, noting that only 46 percent of workers saw wage gains that outpaced inflation.
The pressure to quit for a higher paying job has been highest in the private sector, where 3.5 percent of the workforce left their current employer in July. Workers in industries with historically low wages, tough working conditions and limited teleworking options have led the charge.
The leisure and hospitality sector posted a whopping 6.1 percent quit rate in July, down sharply from 6.9 percent a year ago but still nearly twice the national quit rate.
Restaurants and bars in particular have struggled to return to pre-pandemic employment levels despite rapidly raising wages. The pressure has also made it nearly impossible for those businesses to fire or lay off employees, even amid usual season turnover.
“Hospitality companies tell us that what was once a ‘one strike, you’re out’ rule for employees who failed to show up at work without notice is now more like a ‘ten strikes, you’re out’ rule. They cannot afford to fire workers because they cannot afford to replace them,” said Julia Pollak, chief economist at ZipRecruiter.
“The decline in terminations in industries like hospitality have been so large, they have more than offset the increase in layoffs in the tech sector,” she explained.
Quits have also remained high in retail (4 percent) and the transportation and warehousing sectors (3.5 percent), with both industries facing threats from a decline in goods spending and rising interest rates.
Even so, there are some signs of waning worker confidence, which may lead to a decline in quits.
ZipRecruiter’s job seeker confidence index dropped 4.5 points in August to an all-time low of 97.8, Pollak said, with a greater number of applicants looking for job security over higher wages.
“Since the pandemic, job seekers have been looking for higher pay, less stress, and greater flexibility. In August however, job security rose to the second-place spot in their priority ranking,” Pollak explained.
“One in four employed job seekers say they feel less secure about their current job than they did six months ago. Rising risk of a recession, paired with a wave of recent tech layoffs, has made employees more concerned about the precarity of their jobs.”
The U.S. economy added 372,000 jobs last month, while the unemployment rate held at 3.6%, close to the lowest level in a half-century, the government said on Friday.
Why it matters: Jobs growth remains healthy, even as the Federal Reserve tries to slam the brakes on the economy to contain decades-high inflation.
Forecasts called for 270,000 payrolls to have been added in June.
By the numbers: Job gains in April and May were 74,000 lower than initially estimated.
The labor force participation rate — the share of the population employed or looking for a job — ticked down slightly to 62.2%.
Wages grew 5.1% from the prior year, compared to 5.2% in May.
The backdrop: There has been a spate of companies announcing layoffs, rescinding job offers and pausing hiring, though these developments have largely been concentrated in sectors like housing and technology.
The Fed, meanwhile, delivered its biggest interest rate hike since 1994 last month — the latest move in its aggressive bid to chill the economy and the labor market to choke off inflation.
Economists are curious as to whether baby boomers who accelerated their retirement during the pandemic will return to the workforce, and if so, at what rate.
About 2.6 million older workers retired above ordinary trends since the start of the pandemic two years ago, according to a Bloomberg report citing estimates from the Federal Reserve Bank of St. Louis. Despite this boom, applications for Social Security benefits have remained fairly flat, based on calculations by the Boston College Center for Retirement Research. About 0.1 percent of the U.S. population 55 and older have applied each month, which is in line with pre-pandemic applications.
Pandemic surges in stock and real estate values made this an “opportune time for some workers to step out of the labor force and stay out of the labor force,” Lowell Ricketts, data scientist for the Institute for Economic Equity at the St. Louis Fed, told Bloomberg. “But we’re still expecting a steady, steady trend that some might want to come back,” he noted, citing remote and hybrid work as attractors for seniors eyeing a return to the job market, particularly amid high inflation.
Bureau of Labor Statistics data on labor participation shows that some baby boomers have come back, while many remain on the sidelines. Pre-pandemic, “unretirement” was not uncommon in the United States, due to financial hardship or personal choice. It’s still too soon to say whether the pandemic has challenged this dynamic.
Some “retirees” may have only one foot out the door, too. The Social Security Administration’s Office of the Chief Actuary suggested older people may have “retired” from one job and continued working in another, which explains why they haven’t applied for benefits, Bloomberg reports.
Early retirements have stood to further disrupt the healthcare labor force throughout the pandemic. For instance, census microdata from the Current Population Survey provided by the University of Minnesota shows 14,500 nurses had recently retired as of March 2021, an increase of 140 percent over that figure in March 2019, according to a Pew report. The figure represents people who worked in the profession the past year but said they were now retired and not looking for work.
U.S. jobless claims set a more than 50-year low last week as the red-hot labor market shows few signs of cooling in the near-term.
The Labor Department released its latest weekly jobless claims report Thursday at 8:30 a.m. ET. Here were the main metrics from the print, compared to consensus estimates compiled by Bloomberg:
Initial jobless claims, week ended March 19: 187,000 vs.210,000 expected and a revised 215,000 during prior week
Continuing claims, week ended March 12: 1.350 millionvs.1.400 million expected and a revised 1.417 million during prior week
At 187,000, new jobless claims improved for a back-to-back week and reached the lowest level since September 1969. Continuing claims also fell further to reach 1.35 million — the least since January 1970.
The labor market has remained a point of strength in the U.S. economy, with job openings still elevated but coming down from record levels as more workers rejoin the labor force from the sidelines.
Going forward, however, some economists warned that new cases of the fast-spreading sub-variant of Omicron, known as BA.2, could at least temporarily disrupt mobility and economic activity across the country. As of this week, about one-third of COVID-19 cases in the U.S. have been attributed to the sub-variant, though overall new infections have still been trending down from January’s record high. The impact on the labor market — and on demand in the service sector especially — remains to be seen.
“Right now, U.S. cases are in the sweet spot between the bottom of the initial Omicron wave and the impending explosion in BA.2 cases, but this probably won’t last long,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note this week. “Our bet … is that the coming BA.2 wave will trigger a modest but visible pull-back in the discretionary services sector, thereby dampening consumption in the first month of the second quarter.”
Still, many economists and policymakers have pointed out that the labor market withstood prior disruptions due to the Omicron wave earlier this year. Non-farm payrolls grew more than expected in each of January and February despite the outbreak.
And Federal Reserve Chair Jerome Powell reiterated his assessment of the labor market’s strength earlier this week, just days after calling the current job market “tight to an unhealthy level” in his post-Fed meeting press conference last week.
“The labor market has substantial momentum. Employment growth powered through the difficult Omicron wave, adding 1.75 million jobs over the past three months,” Powell said in a speech Monday. “By many measures, the labor market is extremely tight, significantly tighter than the very strong job market just before the pandemic.”
The tightness of the labor market has also strongly informed the Fed’s decisions in pressing ahead with tightening monetary policy, with the economy showing clear signs of strength and the ability to handle less accommodative financial conditions. Last week, the Fed raised interest rates by 25 basis points in its first rate hike since 2018. And St. Louis Fed President Jim Bullard, the lone dissenter of that decision who had called for a more aggressive 50 basis point rate hike last week, justified his vote in part given the strength of the U.S. labor market even in the face of decades-high rates of inflation.
“U.S. labor markets are today already stronger than they have been in a generation,” Bullard said in a statement.
The U.S. economy added 467,000 jobs in January as the omicron variant spiked to record heights, with the labor market performing better than many expected two years after the pandemic began.
The unemployment rate ticked up slightly to 4 percent, from 3.9 percent the month before.
The monthly report, released by the Department of Labor, stems from a survey taken in mid-January, around the time the omicron variant was beginning to peak, with close to 1 million new confirmed cases each day. The rapid spread during that period upended many parts of the economy, closing schools, day cares, and a number of businesses, forcing parents to scramble.
But the labor market, according to the new data, performed very well during that stretch.
In addition to the robust January, the Department of Labor also revised upward the figure for December’s jobs report, to 510,000 from 199,000, and November, to 647,000 from 249,000. That means that there were some 700,000 more jobs added at the end of last year than previously estimated — showing a labor market with momentum heading into the new year.
The data sets show a labor market that continues to recover at a strong pace from the pandemic’s worst disruption in March and April of 2020.
New outbreaks and variants have sent shockwaves through the economy since then, but the labor market has continued to return, with companies working to add jobs and wages steadily rising.
The industries experiencing growth in January were lead by the leisure and hospitality sector, which added 151,000 jobs on the month, mostly in restaurants and bars. Professional and business services added 86,000 jobs. Retailers added 61,000 jobs in January, which is typically an off month. Transportation and warehousing added 54,000 jobs.
The labor market’s participation rate, a critical measurement that has never fully recovered from losses during the pandemic’s earliest days, also went up significantly, to 62.2 percent from 61.9 percent. That shows more people are reentering the labor force, looking for work.
Average hourly earnings increased by 23 cents on the month to $31.63, up 5.7 percent over the last year. However, those gains for many people have largely been wiped out by rising prices from inflation.
January is traditionally a weak month for employment when retail and other industries shed jobs after the holiday season. Economists say that seasonal adjustments made to the survey’s data to account for this have the potential to distort the survey in the other direction, given that the holiday shopping boom appeared to take place earlier this year than typical.
As such, predictions for job growth for the month had been all over the map. Analysts surveyed by Dow Jones predicted an average of about 150,000 jobs added for the month, in what would be the lowest amount added in a year. Some economists predicted job losses, of up to 400,000.
Last year was a strong year for growth in the labor market, with the country adding an average of more than 550,000 jobs a month — regaining some 6.5 million jobs lost in the pandemic’s earlier days, after the Department revised its numbers. The country has about 2.9 million fewer jobs than it had before the pandemic, according to the figures released Friday.
“Omicron is going to make it look like things dropped off a cliff in January, but overall they did not,” said Drew Matus, chief market strategist for MetLife Investment Management.
Some economists like Matus say that the prospects for such rapid regrowth are more complicated this year, with the fiscal measures that boosted the economy during the pandemic’s first two years, like generous government aid, and record low interest rates from federal bankers, having largely expired, and the country’s confidence in a virus-free future dented after the winter wave.
Since the rollout of vaccines last year, there have been hopes that a return to a more typical rhythm of life could encourage some of the roughly two million people who have left the labor force during the pandemic to seek work anew, but thus far, continued threats from variants — and uncertainty after more closures of schools, daycares, and office — have prevented this from materializing in a substantial way.
There are signs that the omicron exacted a toll on the economy during its peak.
Weekly unemployment claims swelled mid-month to its highest level since October, though the numbers have come down in the two weeks since. Other statistical markers like passenger traffic at airports, hotel revenues, and dining reservations also took a hit during the month.
Recent months continue to be marked by incredible churn in the labor market, as record numbers of workers are switching jobs. In December, some 4.3 million people quit or changed jobs — a number which was down from an all-time high in November but still at elevated. Employers continue to report near record numbers of job openings: the Bureau of Labor Statistics said they reported some 10.9 million openings last month.
HENRY KOTULA 