Despite an increase in the unemployment rate, the US labor market continues to show strength. In August, employers added 315,000 jobs and while the unemployment rate rose to 3.7% it was due to more people joining the labor force and looking for work. While today’s jobs numbers are less than last month’s blowout, the three month average for jobs added is 378,000 per month. With increased labor force participation and robust employer demand for workers, today’s report underscores the labor market is not in a recession.
The fly in the ointment of today’s report is the increase in the unemployment rate. But when looking closely, the rise is ultimately due to positive reasons. Labor force participation rose for all workers including prime-age workers, those ages 25-54. It particularly rose for prime-age women, jumping nearly a whole percentage point. This means that more people are participating in the labor market, and while some of those individuals may not be employed yet, this is promising news for employers. With prime age labor force participation nearly back at its pre-pandemic level, labor supply looks to be recovering better than we’ve seen over the past few months.
While there have been hiring freezes and layoff announcements from the tech sector, 7,000 information jobs were added and the sector is up 4.4% compared to pre-pandemic. However, leisure and hospitality payroll gains posted a disappointing slowdown and the sector remains nearly 7.2% below its February 2020 level.
Today’s report answers the persistent recession question, at least for today: we are not in a recession. The US labor market remains strong with employers adding jobs and labor supply coming back online. More labor force participation gave rise to an increased unemployment rate, which may help the Federal Reserve achieve its soft landing. While there are clouds on the horizon in the form of tightening monetary policy and geopolitical instability, the sun is still shining on the US labor market.
