The “goldilocks” August jobs report is warm enough to satisfy investors, but a bigger slowdown could be ahead
Post-Labor Day labor update... While you were packing coolers and beach towels for the unofficial "last weekend of summer," the Labor Department was packing stats. The August jobs report showed slowing job and wage growth — but a still historically strong labor market.
- The US added 315K jobs, slightly lower than expected and the lowest monthly gain since April 2021. FYI: in July the US gained 526K roles.
- The unemployment rate jumped to 3.7% from 3.5% in July, mostly because more people started looking for work.
- Average hourly earnings grew 5.2% from a year earlier, slowing from July's pace.
Investors are eating the porridge... Some are calling this a "goldilocks" report because it's not too hot, not too cold (but juuust right). While the labor market is cooling, job growth is still way higher than prepandemic levels, and unemployment is just off its half-century low of 3.5%.
- Bad news = good news in this inflationary economy. Investors were relieved jobs didn’t come in too hot, which could compel the Fed to be more aggro with rate hikes.
- Terrible news = bad news. Investors were relieved labor didn’t slow too much, suggesting the Fed’s flation-fighting hasn’t gone too far (yet).
- Still: While job openings outnumber available workers nearly 2-to-1, layoffs are making headlines. Ford, T-Mobile, Wayfair, and Snap have all announced cuts.
Pain’s more bearable when it’s predictable… This report keeps the Fed on track to raise interest rates by 0.75 or 0.5 percentage points this month. Fed chair Jerome Powell said he plans to keep hiking till inflation’s under control. While gas and food prices have come down, they’re still near 40-year highs. JPow did warn there’s economic and labor-market pain ahead. It takes time for all the consequences of higher rates to manifest, but expectations of pain could help reduce market shocks.