The tight U.S. labor market loosened some in August as employers hired fewer workers, more people sought work and wages rose at a slower pace.
Employers added 315,000 jobs last month, down from the prior month’s revised 526,000 jobs, the Labor Department said on Friday, with new jobs spread across the economy. The deceleration marked a pullback from robust gains that characterized much of the past two years. Still, job growth remained well above the prepandemic trend.
“The labor market is still very strong,” said Rhea Thomas, senior economist at Wilmington Trust, adding the August report “shows an initial step towards some cooling of what has been a very tight labor market.”
The jobless rate rose to 3.7% in August from a half-century low of 3.5% the prior month. The increase in the unemployment rate reflected more workers entering the labor force. The share of adults working or seeking a job rose to 62.4% in August from 62.1% in July, as participation among women ages 25 to 54 jumped to the highest level since 2000.
The rise in labor-force participation—along with other signs such as lower average weekly hours worked—suggested employers are finding it easier to hire. That could help ease wage pressures in the coming months. The Federal Reserve is closely watching the health of the labor market and wages trends, an important factor in the outlook for inflation.
Average hourly earnings rose 5.2% in August from a year earlier, in line with the previous month and down from a recent peak of 5.6% in March. Wages rose 0.3% in August from a month earlier, down from July’s increase.
The figures keep the Fed on track to raise interest rates by either 0.5 or 0.75 percentage point at its meeting later this month to combat high inflation.
Stocks turned lower Friday after an initial surge following the release of the August jobs figures, and Treasury yields fell.
“In all, the data suggest labor market conditions are beginning to slow more markedly, which we expect will contribute to weaker economic growth over the coming years,” said
Michael Pearce,
senior U.S. economist at Capital Economics.
Some signs point to an economy that is rapidly cooling under the weight of high inflation. The Fed is raising interest rates to slow the economy and curb price increases. Some major employers, including
Ford Motor Co.
, Snap Inc.,
T-Mobile US Inc.
and
Wayfair Inc.,
have announced job cuts in the past few weeks. Gross domestic product shrank in both the first and second quarters of the year, according to the Commerce Department.
This year’s tight labor market followed steep pandemic-driven job cuts in early 2020 that left the U.S. economy with about 22 million fewer jobs. As employers clawed those jobs back, payrolls grew by a monthly average of about 800,000. Now that payrolls are slightly above their prepandemic peak, rehiring is set to fade as a source of job growth in many sectors, according to economists.
Leisure-and-hospitality might be an exception. The industry—which includes restaurants, bars and hotels—was particularly hard hit by shutdowns earlier in the pandemic and continues to recoup jobs lost in early 2020.
Unemployment rates rose last month across racial groups and ethnicities, with particularly large increases among Black and Hispanic workers. Fewer Black adults were working or seeking a job in August.
Job growth remains historically strong as the labor market holds up better than many other parts of the economy. Hiring remained solid last month in interest-rate sensitive sectors such as construction and manufacturing. Job gains were strong in professional and business services, healthcare and retail.
In Winston-Salem, N.C., Jennifer Coulombe has yet to see any indication of softening labor demand. Ms. Coulombe, an associate vice president at Forsyth Technical Community College, said graduates have little trouble finding a job. “We are now at a point where employers are knocking on our doors begging us for students,” she said.
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One of the school’s recent graduates, Stephen Hendrix, 20 years old, started working while in college as an apprentice for a firm manufacturing furniture-door hinges and drawer slides. The company paid him for the hours he worked and those he spent in class.
By the time he graduated with an associate degree, he was making $18 an hour. After graduation, his pay jumped to $23 an hour.
“I was honestly kind of surprised,” he said. Now Mr. Hendrix is saving up to buy land on which to build a house.
The job market could weaken in the coming months, as the Fed tries to tame inflation that is running near a four-decade high. Fed officials have raised their benchmark interest rate by 0.75 percentage point at each of their past two meetings.
Higher interest rates are intended to make it more expensive for people and businesses to borrow and spend money, which could lead to slower economic growth and an easing of price pressures.
Fed Chairman
Jerome Powell
warned in late August that the Fed’s moves would hurt the labor market and the overall economy.
“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,” he said.
Payrolls by sector in August, change from February 2020
Professional and business services
Trade, transportation and utilities
Education and health services
Professional and business services
Trade, transportation and utilities
Education and health services
Professional and business services
Trade, transportation and utilities
Education and health services
Professional and
business services
Trade, transportation
and utilities
Education and
health services
Professional and
business services
Trade, transportation
and utilities
Education and
health services
Write to Sarah Chaney Cambon at sarah.chaney@wsj.com and David Harrison at david.harrison@wsj.com
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