The U.S. economy added 315,000 jobs in August as the unemployment rate unexpectedly rose to 3.7%. Solid hiring shows that Federal Reserve tightening has barely begun to cool the labor market and there’s a lot more work to do. But a jump in labor force participation soothed investor concerns. After the jobs report, Dow Jones industrial average futures moved higher.
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The average hourly wage rose 0.3% on the month vs. expectations of 0.4%. Annual wage growth of 5.2% slightly trailed forecasts of 5.3%.
Private-sector payrolls rose 308,000 in August, while government jobs rose by 7,000.
Wall Street had expected the August jobs report to show a gain of 293,000 jobs, including 280,000 in the private sector. The jobless rate was expected to hold at 3.5%. Job gains for June and July were revised down by a combined 105,000. The initially reported gain of 528,000 jobs in July was revised to 526,000.
While wage gains are still historically strong, they’re not close to keeping up with consumer prices, even after the annual CPI inflation rate backtracked to 8.5% in July.
The headline job and wage figures come from the Labor Department’s monthly survey of employers. A separate household survey, which is used to derive the unemployment rate, showed that the ranks of the employed rose 442,000 in August.
Dow Jones, Treasury Yields React To Jobs Report
After the jobs report, the Dow Jones rose 0.4% in Friday’s stock market action. The S&P 500 and Nasdaq composite added 0.5%.
The Nasdaq is still trying to snap a five-session losing streak since chair Jerome Powell signaled in his Jackson Hole speech that the Fed will keep policy tighter for longer, raising recession risks.
Through Thursday, the Dow Jones has fallen 14% from its Jan. 4 all-time closing high, but it remains 5.9% above its June 17 closing low. The S&P 500 is up 8.2% since mid-June, but down 17.3% from its all-time closing high. The Nasdaq composite is 10.7% above its bear-market low, but remains 25.6% below its record high.
The summer stock market rally faltered after Powell’s speech because Wall Street now sees little hope for interest-rate relief until the economy goes through an extended period of subpar growth — or worse. The jump in labor force participation, while a welcome change, will only changesthat outlook at the margins — unless it’s the start of a trend.
After the jobs report, markets were pricing in a 64% chance of another 75-basis-point move at the Federal Reserve’s Sept. 20-21 meeting. That was down modestly from 70% odds before the employment report.
After the jobs data, the 10-year Treasury yield, which surged to a two-month high of 3.265% on Thursday, slipped 34basis points.
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Jobs Report Details
The leisure and hospitality sector added 31,000 jobs. Factory employment grew by 22,000.
Construction jobs rose by 16,000. Health care and social assistance payrolls rose 61,500. Retailers added 44,000 jobs, while transportation and warehousing jobs rose 5,000.
Unemployment Rate
The household survey showed that the ranks of the employed rose 442,000. The number of people participating in the labor force, meaning they’re working or actively looking for a job, surged 786,000.
The share of the working age population (age 16 and up) participating in the labor force jumped to 62.4% from 62.1%.
According to the monthly survey of households, 6 million Americans are unemployed, up 344,000 on the month.
Please follow Jed Graham on Twitter @IBD_JGraham for coverage of economic policy and financial markets.
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Read More: Hiring Strong But Unemployment Rises On Labor Force Growth