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US added 315,000 jobs in August but unemployment rate increases


The US economy added 315,000 jobs in August – slightly below expectations – and the unemployment rate rose to 3.7%, almost to pre-pandemic levels.

The numbers indicate that U.S. employers slowed hiring last month in the face of rising interest rates, high inflation and sluggish consumer spending, all of which have worsened the outlook for the economy.

The number of jobs in August was lower than the 526,000 jobs added in July and lower than the average increase of the previous three months.

The smaller gains in August are likely to be welcomed by the Federal Reserve.

The Fed is rapidly raising interest rates to try to cool down hiring and wage growth, which has always been strong. Companies typically pass on the cost of higher wages to their customers through higher prices, fueling inflation.

Fed officials hope that by raising borrowing costs across the economy, they can push inflation back from a nearly 40-year high. However, some economists fear that the Fed is tightening lending so aggressively that it will eventually send the economy into recession.

The economy is on a 20-month hot streak. Economists have been predicting for months that the hiring boom would begin to subside as the recovery from the pandemic stabilized.

Federal Reserve Chairman Jeromen Powell last week said the Fed must keep interest rates high enough “for a while” to slow the economy

The hot job market worries the Federal Reserve as it struggles to contain high inflation.

Fed Chair Jerome Powell Powell has made it clear that his priority is to reduce inflation. He said last week that the Fed must keep interest rates high enough “for some time” to slow the economy.

Many economists believe this will lead to a reversal of some interest rates, with investors speculating about how much and when the next hike will be. Fed officials raised interest rates from near zero in March to a range of 2.25 to 2.5 percent in July.

The Fed is considering an increase of either half a percentage point or three quarters of a point at its September 20-21 meeting. The central bank has forecast that its key rate will reach a range of 3.25% to 3.5% by the end of the year.

“Our decision at the September meeting will depend on the aggregate of the incoming data and the evolving outlook,” Powell said last week.

Job opportunities remain high and the rate of layoffs slow, indicating that most companies are still looking to hire and that the economy is unlikely to move into or even close to a recession. The broadest measure of the economy’s output — gross domestic product — has shrunk for two quarters in a row, meeting one informal definition of a recession.

Economists worry about a potential recession as the Fed Reserve tries to curb high inflation

Economists worry about a potential recession as the Fed Reserve tries to curb high inflation

Economists worry about a potential recession as the Fed Reserve tries to curb high inflation

However, most economists believe that a recession will not have started until unemployment has steadily risen.

But recession concerns mounted after Powell made clear in his high-profile speech last week that the Fed was willing to continue raising short-term interest rates for the foreseeable future and keep it high to curb inflation.

Powell warned that the Fed’s inflation struggle would likely hurt Americans in the form of a weaker economy and job losses.

The Fed chairman also said the job market is “clearly out of balance,” with demand for workers “significantly exceeding available supply.”

Friday’s jobs data and a report earlier this week that job vacancies rose in July after three months of declines suggested that the Fed’s rate hikes have so far restored no such equilibrium. There are about two job openings for every unemployed worker.

The economic picture is highly uncertain, with the healthy pace of hiring and low unemployment contradicting the government’s estimate that the economy contracted in the first six months of this year, which is an informal definition of a recession.

Yet a related measure of economic growth, which focuses on income, shows that it is still growing, albeit at a weak pace.

So far, the Fed’s rate hikes have seriously affected the housing market. With the average interest rate on a 30-year mortgage reaching 5.66% last week — double from a year ago — existing home sales have fallen for six months in a row.

Consumers have moderated their spending in the face of much higher prices, although they spent more in July, even after adjusting for inflation. But companies’ investment in new equipment has slowed, indicating they are taking an increasingly cautious view of the economy.