US unemployment rate up 3.8% in August; nonfarm payrolls increase by 1.87 lakh, beats Street estimates

The US added more jobs in August as employers hired at a firm pace, while wage growth slowed, reflecting a sign of resilient labor market under pressure from interest rate hikes by the Federal Reserve.

US nonfarm payrolls rose 1,87,000 last month following a downwardly revised advance in July, the US Bureau of Labor Statistics reported on Friday, September 1. The nonfarm payrolls print came in above the Dow Jones estimate for 1,70,000.

However, wage growth slipped and the jobless or unemployment rate climbed to 3.8 per cent - the highest level since early 2022. More people entered the labor force from 3.5 per cent in July. It remains below the US central bank's latest median estimate of 4.1 per cent by the fourth quarter of this year.

Healthcare showed the biggest gain by sector, adding 71,000. Other top sectors were leisure and hospitality (40,000), social assistance (26,000), and construction (22,000). Transportation and warehousing lost 34,000 and information declined by 15,000.

The Labor Department data showed that average hourly earnings in August rose 0.2 per cent, slower than the month before. "Employment continued to trend up in health care, leisure and hospitality, social assistance, and construction," the department said.

The number of "new entrants" among the unemployed, referring to people with no prior work experience, edged up as well, according to Friday's report.

The world's largest economy needs to create roughly 1,00,000 jobs per month to keep up with the increase in the working age population.

According to economists who participated by news agency Reuters, nonfarm payrolls were estimated to increase by 1,70,000 jobs last month. Striking Hollywood actors and the bankruptcy of a major trucking company had led economists to anticipate slower job growth in August, according to the poll.

Though demand for labor is slowing, some services businesses like restaurants, bars and hotels remain desperate for workers. Job openings dropped to the lowest level in nearly 2-1/2 years in July, the US government reported this week.

Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25 per cent-5.50 per cent range. The central bank has also vowed to be data-dependent in its upcoming decisions.

“People have a lot of choice and mobility within the market. Employees will stay in the driver’s seat as long the delta between open jobs and available candidates remains this large. So far, businesses are showing a lot of patience and seem to have a higher tolerance to let shifts go unfilled. This is not a strategy that any CEO can employ forever though,' said Chris Todd, CEO of UKG, a payroll and shift management software company.

‘’Businesses are starting to compete to hire again, which will heat up even more as we get closer to the holiday shopping season. If we learned anything from the last couple years, it’s that great workplaces - meaning ones with a reputation for being an exceptional place to work - will have an easier time retaining and recruiting the best talent,'' added Todd.