Don’t let the larger-than-expected gain in August payrolls fool you: The labor market is continuing to cool. The question is whether the moderation will last.
MORE JOBS Must-reads Wage growth also showed signs of moderating, a welcome sign as slower growth in wages is tied directly to slower services inflation. Average hourly earnings rose a less-than-expected 0.2% in August, compared with 0.4% in July, to reach a 4.3% annual pace, down from a 4.4% annual pace in July. Both August figures also came in 0.1 percentage point below forecasts.
Combined with data reported earlier in the week that showed a considerable decline in job openings, a proxy for labor demand, the latest jobs figures suggest the labor market is cooling but not collapsing. These and other recent economic reports likely will keep the Fed on track to hold interest rates steady at current levels of 5.25%-5.5% when policy makers next meet on Sept. 19-20.
“Monetary policy implications are relatively straightforward,” BMO strategist Ian Lyngen wrote after the August jobs data were released. “It just got a lot harder to justify a hike in Q4.” Some economists also highlighted before the report that due to seasonality calculations, initial job figures for the month of August have been consistently revised upward over the past decade. That could mean the latest figures are understating recent job growth—suggesting the clear moderation in June and July could be reversing.
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