By Geoffrey Smith
Investing.com -- The US economy continued to create jobs at a solid pace in August, but wages growth slowed and the unemployment rate ticked up surprisingly, adding to tentative signs of a slight cooling off of the labor market.
Nonfarm payrolls rose by 315,000 through the middle of the month, a slowdown from July's 526,000 but clearly ahead of consensus forecasts for a 300,000 gain. Wage growth also eased by more than expected, with average hourly earnings rising only 0.3% rather than the 0.4% expected. That was down from 0.5% in July. As such, the annual rate of earnings growth stayed at 5.2%, well below the current rate of inflation.
The Labor Department's monthly report also noted that the unemployment rate ticked up to 3.7% of the workforce from 3.5% in July, its highest level since February, but still close to historic lows.
"This growth brings total nonfarm employment 240,000 higher than its pre-pandemic level in February 2020," the Labor Department said, citing "notable" job gains in professional and business services, health care, and the retail sector.
Even so, the pandemic continues to leave deep marks on the economy. Even after a fall of 300,000 in August, some 1.9 million people across the country were still unemployed because their employer closed or lost business during the two-year reign of COVID-19.
Another half a million were still kept out of the labor force altogether by its consequences.
Analysts said the slight decline in wage costs and an increase in the labor force participation rate would take a little of the pressure off the Federal Reserve, pointing to some modest relief on the inflation front. However, they added that the report was broadly consistent with other data showing the labor market is still relatively tight by historic standards. Data earlier this week showed a surprise increase in job vacancies in July and another drop in weekly jobless claims.
"All told, many US labor indicators remain very strong, and the ones that looked the most problematic a few months are ago, are bouncing," said Jens Nordvig, chief executive of Exante Data, via Twitter. "There is really nothing to make the Fed relax and pivot."
"The Federal Reserve should take much solace in the numbers in its battle against high inflation," said Mark Zandi, chief economist with Moody's Analytics. "The job market is bending under the weight of the Fed’s interest rate hikes, but it’s not breaking."