U.S. Economy Predicted to Add Fewer Jobs in August, Yet Stays on Track for Soft Landing
September 1, 2023
Expected Slowdown in US Job Additions
The United States economy is set to see a slight dip in job additions in August compared to July, even as it maintains the optimal balance required for a soft landing. Economists predict a count of 170,000 at 8:30 AM ET, a mild decrease from the 187,000 recorded in the previous month. The unemployment rate is anticipated to stay around a 50-year low of 3.5%. Further, the labor force participation rate, denoting the proportion of the population that is employed or actively seeking employment, is projected to remain steady at 62.6%. Growth in average hourly earnings is also expected to hold steady at 4.4% year-on-year.
A More Balanced Job Market
The Federal Reserve has been attempting to curb inflation by increasing interest rates, in the hopes of creating more room in the jobs market. The disparity between labor supply and demand has kept wages high, however, this week’s data hints at the scenario the Fed has been anticipating – moderating labor demand. This was highlighted by the ADP jobs report released on Wednesday, which showed that companies in August had the lowest job addition in five months.
Indications of Decreased Labor Demand
Other indicators supporting this trend include the BLS’ JOLTS (Job Openings and Labor Turnover Survey), which reported an unexpected drop in job openings in July to the lowest since the start of 2021. In another significant development, the number of job cuts announced by employers in August tripled compared to July. However, the initial jobless claims – a leading indicator – fell below the consensus estimate, suggesting some variance in the trend. Additionally, the ongoing strikes in Hollywood are likely to affect the current jobs data as numerous companies connected to the film and television industry are impacted.
Analysis: Outlook for the August Jobs Report
Analyst Christopher Robb believes that the August jobs report will continue the soft-landing narrative that has been observed in the last three reports, driven by a consistent reduction in worker resignations. However, Robb also notes potential challenges to this outlook, including possible workforce increases due to immigration. According to Robb, such increases could drive job growth to a level that exerts pressure on wages beyond the ideal ‘Goldilocks’ zone, required for a controlled decrease in inflation without severe labor market repercussions.