The unemployment rate unexpectedly rose last month as the economy added another 315,000 jobs—signaling the labor market, which has remained one of the economy’s strongest pillars during the pandemic recovery, could be starting to cool as the Federal Reserve works to combat inflation by tempering consumer demand.
Job gains in August were much lower than the 526,000 new jobs added in July but in line with expectations for a decline, according to data released Friday by the Labor Department.
Meanwhile, the unemployment rate ticked up to 3.7%—falling short of expectations it would remain flat at 3.5%—as the number of unemployed people increased by 344,000 to 6 million.
The monthly jobs report comes one day after career services firm Challenger Gray reported that layoffs spiked 30% in August, compared to one year prior, marking the fourth month of annual increases this year.
The job market has remained one of the economy’s strongest pillars after bouncing back from the Covid recession, and Fed officials have long pointed to the strength as evidence the economy can withstand additional rate hikes. Despite widespread reports of layoffs and hiring freezes, the economy posted impressive job growth for July, with more than half a million new jobs added. At his highly awaited Jackson Hole speech last week, Fed Chair Jerome Powell acknowledged there “will very likely be some softening” in the labor market as interest rate hikes curb demand and ultimately bring down inflation. Despite the unexpected job less, however, job openings actually rose last month—adding to conflicting signs about the state of the labor market.
What To Watch For
Goldman economists project recent job cuts will be reflected in coming reports and said they expect job openings, which are down to 11.2 million from a record high of nearly 11.6 million in March, to “fall further” in the coming months.