The unemployment rate in the United States rose again in August, and job creations slowed, a paradoxically positive signal because the fight against inflation requires an economic slowdown, even if the labor market remains very tense.
President Joe Biden hailed “great news” highlighting in a tweet a job market that “remains strong”, and the fact that “even more Americans are returning to work”.
Still, the jobless rate rose in August for the first time since January, climbing to 3.7%, the Labor Department said Friday.
It had fallen in July to 3.5%, its February 2020 level, just before the economy was hit hard by the COVID-19 pandemic.
Job creations slowed sharply, to 315,000, against 526,000 in July (data revised downwards). This figure is in line with analysts’ expectations.
“Still, August’s advance represents a solid pace of job growth by historical standards,” said Nancy Vanden Houten, senior economist for Oxford Economics, in a note.
Transition
The jobs created in August in the private sector alone, published on Wednesday, had disappointed: 315,000 creations were expected, but there were only 132,000, according to the monthly ADP / Stanford Lab survey.
“We believe these numbers suggest a transition to a more moderate pace of hiring,” said Nela Richardson, chief economist for ADP, during a conference call.
According to her, “companies of all sizes are trying to understand the complex economic situation”, linked to “high inflation” and the lack of workers, as they seek to hire in a big way.
Neither the economic slowdown, nor fears of recession, nor even the measures taken by the American Central Bank (Fed) to curb demand and thus curb inflation had so far got the better of the iron health of the market. employment.
It even showed unexpected dynamism in July, regaining for the first time the 22 million jobs that had been destroyed due to COVID-19. And there were over 11 million vacancies, or two for every job seeker.
The gross domestic product (GDP) of the United States contracted in the first two quarters of 2022, which corresponds to the classic definition of a recession. And if the first economy in the world does not seem to fit into this box this time, it is in particular because of the good shape of its labor market.
The fight against high inflation, however, will go through a slowdown in employment, and even probably through a rise in the unemployment rate.
The Fed Against Inflation
Jerome Powell, the head of the Fed, hammered it last week at the Jackson Hole conference: returning to price stability will lead to “a long period of weaker growth” as well as “a slowdown in the labor market” .
Especially since companies have been facing a labor shortage for more than a year, and, to recruit, are offering wage increases, which is helping to drive up prices.
The Fed is gradually raising its key rates, in order to make credit more expensive for individuals and businesses, and thus slow down consumption, and therefore the pressure on prices.
It will raise rates again at its next meeting on September 20-21.
“Fed officials will likely welcome a slower pace of hiring and an increase in labor supply as small steps toward a less tight job market,” Vanden Houten said.
However, she believes, “the continuing tensions […] and still-robust wage growth” could push the Fed to raise rates again sharply, by three-quarters of a point, as in June and July.
Members of the Monetary Committee, the Fed’s decision-making body, will also be watching the August inflation figures, which will be released on September 13.
Inflation, at its highest in 40 years, however slowed in July, to 8.5% over one year, according to the CPI index.