Kiplinger Jobs Outlook: Gains Will Moderate after August Surge
The jump in August jobs balanced out weak June and July reports. Future gains should be less than 100K per month.
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Hiring came roaring back in August from its summer lull, with a 162,000-job gain, and upward revisions to June and July. Accommodation and food services posted a large 68,000 increase, along with 50,000 new jobs coming from local governments and schools. The strong gain was partially deceptive, however, as these two sectors are subject to fluctuations in seasonal hiring, despite the best efforts of government statisticians to adjust for these quirks, especially during the summer months. The ebbs and flows of teacher hiring have become especially difficult to predict. Other sectors showed mostly moderately positive hiring trends: Health care added 28,000 positions, while construction, manufacturing and temporary help added a combined 45,000.
Despite the large August gain, the new normal for jobs reports going forward is likely to be gains of fewer than 100,000 per month, rather than additions in six digits. Without the special factors mentioned above, the August report would likely have been much weaker.
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The unemployment rate stayed at 4.1% in August. The labor force surged last month for unknown reasons, but most of these new job-seekers found employment, so the labor force participation rate ticked up and the number of unemployed people looking for work rose only slightly. Weekly initial unemployment claims remain low overall. The number of workers forced to work part-time because of slack conditions dropped a large amount in August. That could be a good sign, but the reason why is unclear.
Average hourly earnings gains rose 3.1% over the past 12 months, down from 3.2% in July and 3.4% in June. It will be interesting to see if this is the beginning of the long-expected slowdown in wage gains. More months of data will be needed to see if the lower trend will hold.
The strong August report raises the chances of an interest rate increase at the Federal Reserve’s next policy meeting, on September 16. But the next inflation report, coming on September 11, will probably play the deciding role for the Fed. A high inflation number would likely force the central bank to raise rates, while a softer number could let it stand pat for now.
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