Jobs: Strong but Moderating Growth Has Something for Both Bulls and Bears

Kiplinger’s latest forecast on jobs

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Strong job gains of 315,000 in August had something for stock market bulls and bears alike. Job gains were a large 315,000, but short of the 526,000 in July. The unemployment rate rose for the first time in a year, but that was because of an influx of people outside the labor force coming in to look for work. It’s not known why – perhaps it was because of easing COVID-19 infection rates in August. Wage growth was still strong at 5.2%, but it was also the lowest in six months.

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It is uncertain how the Federal Reserve will see this report. There are hints of softness, such as slower hiring and a bit slower wage growth. But Fed Chairman Jerome Powell will likely dismiss the hints and maintain a firm rate-hiking policy unless and until the hints become stronger. It is expected that the Fed will raise short-term interest rates by either three-quarters or a half-percentage point at its Sept. 21 meeting. How big a rate hike the Fed chooses will tell investors how much importance it places on the hints of a slowing economy.

August job growth was spread pretty evenly across the economy. Gains were strong in retail and in health care, but were the lowest in almost two years in food service. This may be an indication that restaurants already have enough staff, or that they are having a harder time finding workers.

Wage growth among production (non-supervisory) workers eased to 6.1%, down from a peak of 6.8% in March. Wage rates have jumped the most for these workers, since labor shortages were especially severe for service workers during the pandemic. But those gains will likely ease faster as the pandemic winds down and more service workers come back to the labor force.

David Payne
Staff Economist, The Kiplinger Letter
David is both staff economist and reporter for The Kiplinger Letter, overseeing Kiplinger forecasts for the U.S. and world economies. Previously, he was senior principal economist in the Center for Forecasting and Modeling at IHS/GlobalInsight, and an economist in the Chief Economist's Office of the U.S. Department of Commerce. David has co-written weekly reports on economic conditions since 1992, and has forecasted GDP and its components since 1995, beating the Blue Chip Indicators forecasts two-thirds of the time. David is a Certified Business Economist as recognized by the National Association for Business Economics. He has two master's degrees and is ABD in economics from the University of North Carolina at Chapel Hill.