In August, the United States added 187,000 jobs, but the unemployment rate also went up to 3.8 percent, as per data released by the Labor Department last Friday.
This jobs report highlights that the labor market reached a plateau in August, a crucial moment as the Federal Reserve contemplates another increase in interest rates. Leading economists had anticipated a gain of 170,000 jobs, with the jobless rate remaining steady at 3.5 percent, in line with consensus estimates.
While the jobless rate did rise by 0.3 percentage points in August, there was a positive uptick of 0.2 percentage points in the labor force participation rate. This is noteworthy as it has remained relatively stagnant since March.
The Federal Reserve has been consistently raising interest rates, marking the highest levels in over two decades. This move is part of their strategy to rein in an economy that was experiencing runaway inflation just a year ago.
Though inflation edged up slightly in July, as reported by the Commerce Department’s personal consumption expenditures price index last Thursday, it has come down from its peak of 9.1 percent seen last summer.
As the Federal Reserve considers another interest rate hike, they are closely monitoring signs of the job market slowing down due to previous rate increases.
In recent news, job openings fell below 9 million for the first time in more than two years, and the rate at which Americans are quitting their jobs hit its lowest point since January 2021. This data was released in the Job Opening and Labor Turnover Survey this Tuesday.
During a speech at a gathering of central bank officials in Jackson Hole, Wyoming, Fed Chairman Jerome Powell admitted that the battle against inflation is not yet complete. He stated, “Getting inflation sustainably back down to 2 percent is expected to require a period of below-trend economic growth as well as some softening in labor market conditions.”
The Federal Reserve remains hopeful that the United States can combat inflation without plunging into a recession. Powell and other Fed officials have acknowledged that their rate hikes could potentially push the economy into a significant downturn.
The outcome of the Federal Reserve’s fight against inflation will carry significant weight in the 2024 election.
President Biden and the Democrats are striving to maintain control of the White House and Senate, partly by highlighting the rapid economic recovery from the COVID-19 recession.
On the other hand, Republican lawmakers and presidential candidates have squarely placed the blame on Democrats for fueling the high inflation experienced in the United States and around the world over the past two years.