CHAPEL HILL – The pace of job growth slowed in August compared to prior months, but the U.S. economy added 315,000 jobs last month, according to the latest data from the U.S. Bureau of Labor Statistics. And labor force participation grew as well.
Thus the U.S. unemployment rate increased by two-tenths of a percent, and is now up to 3.7%, according to the data.
But Greg Brown, professor at the University of North Carolina at Chapel Hill, who spoke about the labor market and how the Federal Reserve may respond to the latest employment figures during a media briefing on Friday morning, sees some good news in the data.
“The biggest surprise was that the unemployment rate ticked up to 3.7%,” said Brown. “This is interesting.”
According to Brown, this figure comes from the household survey, which showed that in August, even more people were looking for work than who landed jobs in the month.
The unemployment rate increased as a result.
And that’s actually a good sign, potentially, from the Federal Reserve’s perspective, said Brown.
The labor force participation rate, measured as the percentage of people who are participating in the labor force across the U.S. economy, also ticked up in August, according to the most recent data from BLS.
“This is a huge issue, if there is going to be a soft landing,” said Brown. “If the Fed is going to thread that needle, it is going to be from more people joining the labor force.”
Brown noted that this was the “key to thinking about what is going to happen” with the monetary policy set in place by the Federal Reserve.
But just because the economy has now surpassed employment levels above the pre-COVID peak by about 240,000 jobs doesn’t mean that the gains in employment are evenly distributed across the economy, said Brown.
Take labor and hospitality as a sector, which remains 1.2 million jobs short of the pre-pandemic peak, said Brown.
“These are particularly challenging jobs to fill, because they tend to be lower-wage jobs,” said Brown. “It’s probably a supply-side issue.”
One thing employers could do to attract talent to fill open roles is to increase offered wages. And, some employers appear to be doing that across the U.S. economy, according to the latest BLS data.
The data shows that in August, hourly earnings increased by 0.3%, which was actually less than what was expected by a tenth of a percent, however, within the margin of error, according to Brown.
“I don’t think we should read too much into that,” said Brown.
Still, historically, average hourly earnings are growing about 2% per year, said Brown. “Over the last year, it’s been more like 5%,” said Brown. “This is something we can’t really sustain, in terms of wage growth, and also have a 2% inflation rate.”