Labor Market Remains Tight As Unemployment Ticks Up
The U.S. added 315,000 jobs in August, as unemployment rose slightly to 3.7%, according to data released by the Department of Labor Friday.
The number of unemployed people rose by 344,000 to 6 million, an increase of 0.2 percentage points from July, accordingto the Bureau of Labor Statistics data. A survey of economists conducted by The Wall Street Journal in advance of the report’s release estimated that 318,000 jobs would be added and that unemployment would remain around 3.5%.
“The labor market isn’t just running hot, it’s like a burning inferno,” Megan Greene, global chief economist for the Kroll Institute and a senior fellow at Brown University, told CNN ahead of the data’s release.
🇺🇸 #Employment situation cooling:
1/ NFPs slow (2-month low)
2/ Wages slow (MoM) (4-month low)
3/ UR bottomed out (6-month high)
— Christophe Barraud🛢🐳 (@C_Barraud) September 2, 2022
Despite how tight the current labor market is, some sectors are being forced to lay off employees that were brought on to handle a surge in pandemic supply, CNN reported. Technology companies and those that work closely with them were most affected, with companies like Robinhood and Snap Inc each cutting around 20% of their employees in August. (RELATED: ‘Whiplash’: Economists Warn The Labor Market Is The Next Victim Of Inflation)
Meanwhile, inflation is putting pressure on other sectors of the economy, with the Federal Reserve raising interest rates and the gross domestic product of the U.S. shrinking for two quarters in a row, the WSJ reported. With the Federal Reserve showing no sign of halting or reversing interest rate raises, it will be more expensive for businesses and private individuals to borrow money, which could slow growth, according to the WSJ.
“Reducing inflation is likely to require a sustained period of below-trend growth,” said Fed Chair Jerome Powell, in an Aug. 26 speech about the Fed’s plan to rein in inflation. “Moreover, there will very likely be some softening of labor market conditions. While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses.”
Despite layoffs at tech companies, there is a labor shortage in other industries, such as service industries like chain restaurants, where understaffed restaurants and reduced hours of operation is the “new normal” according to CEO John Peyton of IHOP-parent Dine Brands Global.
Labor force participation has also decreased, to just above 62% of working age adults in July, down 5% from the early 2000s in a steady decline, according to CNN. While the exact causes of the decline in labor force participation are not well understood, health issues, early retirement and a lack of available child care are all suspected to be contributing factors, according to CNN.
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