U.S. jobs report shows hiring has shifted into lower gear

The labor market appears to be treading water, with employers’ desire to hire staying just ahead of the supply of workers looking for jobs.

That’s the picture that emerges from the August jobs report, released Friday, which offered evidence that while softer than it has been in years, the landscape for employment remains healthy, with wages still growing and Americans still eager to work.

“This report does not indicate that we’re taking another step toward a recession, but we’re still seeing further signs of cooling,” said Sam Kuhn, an economist with the recruitment software company Appcast. “We’re trending more closely to a 2019 labor market than the labor market in 2010 or 2011.”

Employers added 142,000 positions last month, the Labor Department reported. That was somewhat fewer than forecast, bringing the three-month average to 116,000 jobs after the two prior summer months were revised down significantly. Over the year before June, the monthly average was 220,000, although that number is expected to shrink when annual revisions are finalized next year.

The unemployment rate edged down to 4.2%, alleviating concerns that it was on a steep upward trajectory after July’s jump to 4.3%, which appears to have been driven by weather-related temporary layoffs.

In other signs of stability, the average workweek ticked up to 34.3 hours and wages grew 0.4% over the month, slightly more than economists had expected but not enough to add significant fuel to inflation.

The data is unlikely to send a clear signal to the Federal Reserve as it weighs how quickly to start relaxing interest rates later this month. Investors currently expect a quarter-point cut, but it could be larger if Fed officials judge that the labor market is deteriorating swiftly.

Stocks and bond yields fell through the day, as investors digested the mixed report.

Other indicators remain robust. The economy grew at a 3% annualized rate in the second quarter when adjusted for inflation, an acceleration from the first quarter. Some measures of economic confidence, such as the University of Michigan consumer sentiment index, have been recovering from a deep swoon over the past few years. A disproportionate number of jobs have been added since the pandemic in relatively high-wage industries, the Federal Reserve Bank of Cleveland reported.

The strength of the labor market has been powered by large numbers of people starting to look for work, especially women 25-54, who reached their highest level of labor force participation on record, at 78.4%. That’s come despite the tight market for child care, where employment has been sinking since May.

Employers have not started shedding workers in large numbers; initial claims for unemployment insurance have drifted downward in recent months and the layoff rate remains lower than usual. The number of people working part time because they can’t find more hours, while rising, remains within historical norms.

But businesses haven’t been posting many positions, and workers have been loath to leave for new opportunities. The job opening rate is back down where it was before the pandemic, after spiking to record levels in 2022, and there are roughly the same number of vacancies as people looking for work.

“It seems like this is more of a freeze on the hiring side, but companies aren’t necessarily getting rid of employees yet,” said Thomas Ryan, an economist with Capital Economics. “The typical recessionary dynamics, where a few people get laid off and it spirals, don’t seem to be in place.”

That’s good for people who have jobs, but a difficult situation for those just out of high school or college trying to find one for the first time.

One of those staying put is Justin Burgess, 44, who works at a pizza place in Seattle. The pandemic put him out of work for a few months, but federal relief payments gave him enough money to invest in the stock market for the first time, and pay down credit card debt.

Now getting by has gotten harder, as rent on the house he shares with friends has risen, and he has spent down that small savings cushion. Even as Seattle’s minimum wage has risen — it’s now $17.25 an hour for smaller businesses with tipped workers like Burgess — he doesn’t feel he’s seeing much benefit.

“People are beginning to resent the whole tip system, so we’re making less in tips, and I’m living check to check still,” Burgess said. Just recently, his management notified the staff that 2.5% would be deducted from tips to cover credit card swipe fees.

Food service and drinking places, like the one where Burgess works, added about 30,000 jobs in August, but the industry has barely surpassed its prepandemic level after a slow recovery.

The only other sectors adding significant numbers of jobs were health and other categories of care, which gained 44,000 jobs, and construction, which was up by 34,000 jobs — another month of surprisingly robust growth two years into a cycle of elevated interest rates that has made financing new projects more difficult.

Support for that construction has come from federal aid packages for airports, transportation infrastructure and clean energy installations. Rebecca Fountain, who runs a construction firm in Las Vegas, has been winning some of those government bids. The volume of new opportunities has perplexed Fountain and her industry colleagues.

“We see there’s some kind of slowdown coming, and yet we’re getting all kinds of work now,” she said. “We’re not quite sure what to think other than, ‘Get the contracts and start building as soon as possible so they can’t rescind them.’”

Like many other employers in Las Vegas, Fountain uses workers supplied by a local union, which means she doesn’t have to recruit and pays a flat hourly rate. But the hiring hall has been stretched thin in recent months, she said, and sometimes sends people with less experience than she would like.

That squares with surveys collected by the Associated General Contractors, a trade group, and Arcoro, a construction software company, which found that union-shop firms are now having just as hard a time filling roles as nonunion ones — especially for positions requiring a high degree of skill.

The wave of immigrants who have arrived over the southern border in recent years may be helping to satisfy that appetite for workers, since most of them gain employment authorization within six months. Adam Kamins, a senior director with Moody’s Analytics, notes that migrants have found their way to big cities and agricultural areas like the Central Valley of California, allowing production to continue when it might otherwise have halted.

“I think they are generally ending up in places where the need for workers is more pronounced,” Kamins said. “This influx of new workers into the economy has allowed us to bring inflation under control, but do so in a way that hasn’t been as painful as it might have been otherwise.”

One notable weak spot is manufacturing, which has been mostly flat since late 2022 and contracted by 24,000 jobs in August. Outside federally subsidized investments in battery and semiconductor plants that have generally not started operating, high interest rates have weighed on new investment, while the strong dollar has depressed exports.

The impending election also has companies putting off big decisions, given the large policy changes that could result if the White House or Congress changes hands, said Timothy Fiore, the Institute for Supply Management’s Manufacturing Business Committee chair.

“We’ve pretty much run out of the order book,” Fiore said, “and in the absence of new orders coming in, we have companies stepping down their production plans.”

This article originally appeared in The New York Times.

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