The unemployment rate in the United States climbed in August to its highest level since February 2022, but job creations were more numerous than expected, the Labor Department announced on Friday.
The unemployment rate stood at 3.8%, against 3.5% in July. And 187,000 jobs have been created, more than the 170,000 that analysts expected. On the other hand, job creations for June and July were revised down sharply, with a total of 110,000 creations less than what had been initially announced: 105,000 jobs were created in June, against 185,000 initially announced, and 157,000 in July, instead of 187,000.
“Employment continued its upward trend in health services, leisure and hospitality, social work and construction. Employment in transport and logistics has declined,” details the Department of Labor in its press release. The rise in the unemployment rate despite still numerous job creations is notably due to the fact that more than half a million people entered the labor market during the month of August. “Wages have decelerated and the unemployment rate has reached its highest level since February 2022 thanks to a strong increase in the labor force,” commented Rubeela Farooqi, chief economist for High Frequency Economics.
A labor shortage since Covid has indeed pushed employers to raise wages. This was good news for workers, but it contributed to soaring inflation. A lasting return of inflation to an acceptable level therefore requires an “easing of labor market conditions”, recently declared the president of the American central bank (Fed), Jerome Powell.
The Fed is on the front line to slow inflation. Its main tool to achieve this is to raise its main policy rate, which in turn pushes banks to offer loans at higher rates to households and businesses. They are then less inclined to consume or invest, which eases the pressure on prices. The question now is whether or not it will extend the increases at its next meeting on September 19-20. It has done so 11 times since March 2022, bringing its rates to their highest in 22 years, within a range of 5.25 to 5.50%.
“A slowdown in wage pressures and an increase in the labor force participation rate are encouraging, confirming some easing in labor market conditions, in line with what Fed officials want. We believe that these data argue in favor of a lack of rate hikes” at the September meeting, anticipates Rubeela Farooqi. Some sectors are still struggling to find enough workers. For example, in the middle of the back-to-school period, the city of Philadelphia (Pennsylvania) does not have enough bus drivers, and offers 300 dollars a month to parents who do not use the school bus, the famous yellow schoolbus, but drop their child off at school themselves.
But inflation, which had been slowing for months, picked up again in July, driven by house prices. It stood at 3.2% over one year, against 3.0% the previous month, according to the CPI index of the Department of Labor, and which refers. And consumption remained very solid in July, although it was mainly services, and not goods, that benefited from this good health.
