US: Labor market adds 315K jobs as labor force participation and wages increase

Nonfarm payroll employment increased by 315K in August after July's revised 526K increase. The unemployment rate unexpectedly rose to 3.7% as the participation rate increased. Economists expected an increase of approximately 300K in employment and a 3.5% unemployment rate. Employment growth in August appears to have been slower, but still at a healthy rate. While the labor market is still showing a resilient image, the increase in the unemployment rate draws a testing direction in terms of the Fed's demand and efforts to slow down inflation. Non-farm employment increased by 5.8 million in the last 12 months as the labor market continues to recover from job losses from the pandemic-induced recession. This growth brings total nonfarm employment to 240K higher than the pre-pandemic level in February 2020.

If we look at the sub-items; While private sector employment came in at 308K, above the 300K expectation, the unemployment rate in broad terms increased from 6.7% to 7%. The participation rate, which is the general explanation for the increase in the unemployment rate, increased from 62.1% to 62.4%, indicating more entry into the pool from outside the workforce. If this rate had not increased, we would have observed that the unemployment rate remained at the bottom despite the lower employment growth. On the other hand, the fact that more people are looking for work may also be an indicator of greater confidence in improving employment conditions. We can see how much the trend has turned into reality through the transformation into employment in the following data.

Notable job gains occurred in professional and commercial services, healthcare, and retail trade. Retail added 44K jobs in August and 422K in the last 12 months. Manufacturing employment continued to rise in August (+22K) and earnings were concentrated in the durable goods sectors (+19K). Employment in financial activities increased by 17K in August and by 200K during the year. Employment in the entertainment and hospitality sector changed little in August (+31K) after an average monthly earnings of 90K in the first 7 months of the year. Employment in August changed little in other major sectors, including construction, transportation and storage, information, other services and government. Average working hours for all employees also decreased by 0.1 hour to 34.5 hours in August.

As the main detail the Fed looks at, wages seem to be below expectations. In August, average hourly earnings for all employees rose 0.3% to $32.36. Average hourly earnings increased 5.2% over the last 12 months. Average hourly earnings for private sector manufacturing and non-audit workers rose 0.4% to $27.68 in August.

In terms of the Fed; The U.S. economy continues to produce jobs of a good standard, and in this broad context, it still appears to be a reliable economic activity. Since there is no market that shows signs of recession, we do not see a realization that will take a step back from the Fed's 75 basis point rate hike in September. On the other hand, the fact that wage increases are under expectations may be a softer image for inflation, which will of course depend on many different variables. However, if the demand does not increase inflation, it will shape the Fed's future steps as lower rate hikes or lower maximum interest rates. This is the detail that softens the data.

Kaynak: Tera Yatırım- Enver Erkan
Hibya Haber Ajansı