Economy adds 315K jobs in August, unemployment ticks up

Job growth slowed slightly in August but remained well above pre-pandemic levels as steady consumer spending powered another strong month of hiring.

The U.S. added 315,000 jobs last month and the unemployment rate rose to 3.7 percent, according to data released Friday by the Labor Department, up from 3.5 percent in August.

Economists expected the U.S. to gain roughly 300,000 jobs last month without the unemployment rate budging, according to consensus estimates. While the unemployment rate rose by 0.2 percentage points, the labor force participation rate also rose by 0.3 percentage points, to 62.4 percent.

“Given how low the unemployment rate is now and the slowing economy, ongoing improvement in the unemployment rate is likely to be inconsistent,” wrote Daniel Zhao, senior economist at Glassdoor, in a Friday analysis.

“However, the rise in unemployment is not an immediate red flag as it was married with a rising labor force participation rate,” he continued.

Rising unemployment and slowing job gains are rarely good news for an economy. But the August jobs report showed the economy moving toward ample job growth and lower inflation.

The U.S. has recovered all of the 21 million jobs lost at the onset of the pandemic and has already added close to 3 million jobs in 2022 alone. But businesses have still struggled to hire enough workers to meet intense demand from consumers, even after raising wages at rapid rates.

Some economists and policymakers have been concerned that the national labor shortage could be fueling high inflation by forcing businesses boost wages and prices quickly. As the size of the workforce increases, businesses may have an easier time finding workers without having to raise wages at rapid rates. That could also help businesses keep their prices stable and sap momentum from inflation.

“The best news in this jobs report is that the unemployment rate went up. It did so for all the right reasons: people are coming back to the labor force. And so despite stiff headwinds—inflation, rising interest rates, a strong dollar—employers are finding it a little bit easier to hire,” wrote Julia Pollak, chief economist at ZipRecruiter, in a Friday analysis.

Wage growth slowed slightly in August as more workers entered the job market, posting a 0.3 percent monthly gain. Wages are up 5.2 percent on the year, but would have only increased 3.6 percent at August’s pace of earnings growth.

“Cooling wage growth and rising labor force participation keep the labor market on course for a soft landing where job gains can continue without adding to inflationary pressures,” Zhao wrote.

The U.S has now gained 240,000 more jobs than it had before the pandemic derailed the economy in March 2020, with several sectors well above their pre-COVID-19 employment levels.

Professional and business services firms led all other sectors last month with a gain of 68,000 jobs and has added 1.1 million jobs over the past 12 months. Retail trade companies added 44,000 jobs in August.

Health care employment rose by 48,000, but remains 37,000 workers short of pre-pandemic levels despite the rising need for medical services.

The leisure and hospitality sector also added 31,000 jobs in August, a notable decrease from several months of rapid job growth. The industry is still 1.2 million jobs short of its pre-pandemic level.

Updated at 9:43 a.m.