Employment rose by 187,000 last month, slightly above market expectations of 170,000. The unemployment rate rose from 3.5% to 3.8%, marking the 19th consecutive month that the unemployment rate remained below 4%. Today’s report is consistent with the economy transitioning to solid and stable growth, an important and necessary slowdown that will help ease price pressures while maintaining a strong labor market.
In the monthly employment report, the unemployment rate is likely to increase for two main reasons. Perhaps more workers were lost than gained (a decline in the employment-to-population ratio). Alternatively, more people may enter the labor market in search of work, which could become a more active factor in the rise in the unemployment rate (increase in the labor force participation rate). The 30 basis point rise in the unemployment rate in August was due solely to the latter factor, with more than 700,000 people entering the labor force and the participation rate rising to 62.8 percent, the highest level of the post-pandemic recovery. In contrast, the employment-to-population ratio remained flat in August.
Employment growth for June and July was revised downward by a total of 110,000 jobs, a large but unprecedented revision for two months. Because these monthly data are noisy and subject to correction, CEA has found that averaging over several months can more effectively extract the signal from the noise. Over the past three months, my salary has increased by 150,000 per month.
The three-month average job growth of 150,000 jobs is fully in line with our expectations at the current stage of the recovery, as our report makes clear.
forecaster From the Commander in Chief, President Biden, May 2022 Op-Ed:
With the right policies, the United States can move from recovery to steady, steady growth and reduce inflation without abandoning all of these historic policies. [LABOR-MARKET] profit. Growth will look different during this transition period. We may see a record decline in job creation, but this is nothing to worry about. In fact, if next year’s average monthly job creation moves from his current level of 500,000 to his level of nearly 150,000, that kind of job growth is consistent worldwide, This may be a sign that they are successfully transitioning to the next stage of their recovery. THA low unemployment rate and healthy economy.
Second, given the expected population growth, we consider the number of jobs that would need to be added each month to maintain constant unemployment and participation rates each month. As CEA noted on Twitter, “100,000 jobs per month is roughly consistent with stable unemployment and participation rates.” (Readers can enter their own assumptions using this excellent Atlanta Fed calculator.) The fact that the labor market is above its break-even point means that during this economic expansion, the unemployment rate is very low. This is one of the reasons why it remains so low.
Third, revisit the scatterplot. Each dot represents the intersection of the average monthly salary increase (y-axis) and the 12-month moving average of the unemployment rate from a similar point in the previous business cycle (2015-2019) (x-axis). To avoid pandemic distortions. The intuition behind the positive slope of the regression line is the same as the president’s op-ed. In other words, as the labor market expands and ages, the unemployment rate declines and the average monthly number of employees declines. Notice that the red dot representing today’s report is close to the regression line. This is another reminder that the underlying pace of employment growth is sustainable and what we expect.
The transition to more stable and stable growth is also visible in other important indicators. Real GDP for the second quarter was revised downward from 2.4% to 2.1%, still a perfectly solid growth rate, but closer to the economy’s underlying trend. We also learned earlier this week that the number of job openings fell by 338,000 in July, when the unemployment rate was 3.5%. (It’s much better for workers.) Personal consumption expenditure (PCE) inflation increased at an annualized rate of 2.1% over the past three months, a rate close to the pre-pandemic trend for this indicator, according to yesterday’s personal income report.
Equally important to these stabilizing forces is an increase in labor supply. As mentioned above, overall participation rates rose to their highest levels since the pandemic in August, and participation rates among prime-age adults (25-54) rose as well. At 83.5 percent, it is half a percentage point above pre-pandemic levels. Increasing labor supply is a critical piece of the puzzle, supporting a strong and growing labor market and economy while ensuring that employers have the supply of workers they need to grow and prosper.
Our goal is to maintain the gains we have made while continuing to accelerate our transition to steady, stable and sustainable growth. And of course, a month can go either way, so CEA will be closely tracking data flows and measuring how much these speeds slow down or speed up. But for now, our irony here at CEA is that this trend is our friend, and she’s a great friend.
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