U.S. employers added 315,000 jobs in August, Labor Department data showed Friday, hitting a 20-month streak in strong job growth that's powering an economy through decades-high inflation.
August job growth was down compared with a revised 526,000 blockbuster gain in July and an average gain of about 440,000 jobs during the past three months, but it still represented a strong pace of growth.
"It's definitely a downshift from what we saw earlier in the year," said Sarah House, an economist at Wells Fargo. "But step back and look at the bigger picture here. The fact that we're still putting up gains of over 300,000, even as we've recovered all the jobs lost, that's still a really impressive feat."
The unemployment rate ticked up to 3.7% from 3.5% in July, according to the labor data.
"Jobs are up, wages are up, people are back to work, and we're seeing some signs that inflation may be, may be ... beginning to ease," President Joe Biden said Friday.
The biggest job gains were in the professional and business services industry, which added 68,000 jobs in August, shooting past its pre-pandemic numbers. The industry saw the strongest gains in computer systems design, management and technical consulting, and architectural and engineering services, while legal services lost 9,000 jobs.
Employment in health care rose by 48,000 jobs, with notable additions in physicians, hospitals, and nursing and residential care facilities. Retail trade added 44,000 jobs, and manufacturing continued to trend up by 22,000 jobs.
Employment in leisure and hospitality saw little change after average monthly job gains of 90,000 in the first seven months of the year. The industry still remains below its pre-pandemic levels by 7%.
BRIGHT SPOT
Economists have been saying for months that job growth was likely to slow as the economy comes down from last year's vaccine-fueled boom and as higher borrowing costs make it harder for businesses to expand.
Instead, the labor market remained red hot even as other parts of the economy, such as the housing market, turned sharply lower. The data released Friday, though strong, indicated the long-delayed slowdown might finally have begun.
Ordinarily, such a slowdown would be concerning, especially at a time when analysts are warning of a possible recession. But in the up-is-down world of the late-pandemic economy, a modest pullback in job growth could actually be good news, albeit not for everyone.
That is because policymakers at the Federal Reserve believe that the job market is effectively overheated: With roughly twice as many open jobs as job seekers, employers are competing for workers by pushing up wages and, ultimately, prices.
The Fed is hoping that by raising interest rates, it can cool off the job market enough to bring down inflation, but not so much that unemployment skyrockets.
"I think stability is very welcome right now for the economy," said Michelle Meyer, chief U.S. economist for Mastercard. "If we have a glide path there, if we take these steps from 500,000 jobs to 300,000 to 200,000, that's a better outcome than if we have a dramatic shock where suddenly next month we have negative job growth."
MIXED SIGNALS
There are signs the Fed's plan may be working. The growth in the labor force should help ease the shortage of workers.
Job openings have fallen from their peak last spring, wage growth has ebbed, and fewer employees are quitting their jobs, an indication that competition for workers may have eased somewhat.
Yet layoffs, despite a few high-profile announcements, have remained low, and employers have pared hiring plans, not abandoned them entirely.
"Yes, employer demand is cooling," said AnnElizabeth Konkel, an economist at career site Indeed. "In some areas, it's cooling a little bit faster. But it's still strong. It's still robust."
Indicators of a souring economy, such as declines in domestic output and persistent higher prices for just about everything, suggest a less rosy picture, raising questions about how much longer the hot job market can last.
The mixed signals have led many economists to warn that workers will eventually face a weaker job market, especially if there is a recession.
Although inflation eased slightly but remained high in July, at 8.5%, and workers have continued to see historic wage growth this summer, paychecks have not kept up with inflation, hitting low-income households the hardest.
WAGES TICK UP
The data Friday showed that average hourly earnings increased by 10 cents for private sector workers in August, or by 0.3% to $32.36 an hour. During the past year, wages have increased by 5.2%.
The labor force participation rate also ticked up by 0.3% in August up to 62.4%, a sign that more Americans are looking to return to work, with many finding jobs. But that figure remains below its February 2020 levels, frustrating employers facing severe labor shortages.
"Broadly speaking, the economy is slowing even though the job market has been very hot," said Daniel Zhao, lead economist at Glassdoor. "But the overall economy and job market can't be out of sync for too long. I think the labor market still has gas left in the tank and clearly more than we expected a few months ago, but eventually it will have to fall back to earth."
The 526,000 jobs added in July -- when the U.S. fully regained the 22 million jobs lost early in the coronavirus pandemic -- more than doubled forecasters' expectations and substantially reduced recession fears.
"Things are still very hot, but July's report was more of a fluke than the start of an accelerator," Zhao said.
Industries that are more sensitive to interest rate increases, including construction, durable goods production, mortgages and temporary help services, will see a decline in jobs first if the labor market weakens, economists say.
"When we stop seeing growth in those industries, that's when you think the first shoe is beginning to drop. It hasn't yet," said Erica Groshen, an economics adviser at Cornell University and the commissioner of the Bureau of Labor Statistics from 2013 to 2017.
STANDING FIRM
The strength of the job market has emboldened the Fed to take aggressive action to fight inflation.
Last week, central bank Chairman Jerome Powell said the Fed will not stop raising rates until inflation is more under control, though he expects that will probably soften the labor market.
Powell made clear while speaking at the Fed's annual conference near Jackson, Wyo., that the central bank was prepared to continue raising short-term interest rates and to keep them elevated "for some time" to keep fighting inflation.
He warned that the Fed's inflation fight would likely cause pain for Americans in the form of a weaker economy and job losses.
The Fed chair also said the job market was "clearly out of balance," with demand for workers "substantially exceeding" the available supply.
Friday's jobs figures, and a report earlier this week that showed the number of job openings rose to 11.2 million in July from 11 million in June, suggest that the Fed's rate increases so far haven't restored much balance.
Information for this article was contributed by Lauren Kaori Gurley of The Washington Post, Ben Casselman of The New York Times and Christopher Rugaber of The Associated Press.