Sunday, September 4, 2022

US jobs still rolling along in August. Why does Fed want to stop this?

With the Federal Reserve knocking down the stock market due to desire to crush inflation (and economic growth with it), August's jobs report was going to be a big bit of evidence to see if the Fed should keep severely tightening, or if things were calming down on their own.

Well, we know jobs are still coming back, based on these numbers for Friday. But the spin from financial media was interesting.
The economy added 315,000 jobs for the month, just below the Dow Jones estimate for 318,000 and well off the 526,000 in July and the lowest monthly gain since April 2021.

The unemployment rate rose to 3.7%, two-tenths of a percentage point higher than expectations, largely due to a gain in the labor force participation rate to 62.4%, tied for the highest level of the year. A broader measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons climbed to 7% from 6.7%.

Wages continued to rise, though slightly less than expectations. Average hourly earnings increased 0.3% for the month and 5.2% from a year ago, both 0.1 percentage point below estimates.
315,000 new jobs seems pretty good to me. And even the increase in unemployment was due to the "good reason", where 786,000 more people entered the work force, but "only" 442,000 of them found jobs. Given that there were still over 11 million job openings in July, I'd think quite a few of those new entrants will be able to find work in the near future.

We now have it confirmed that there are more jobs now than before the pandemic broke out in early 2020, and 5.7 million jobs in the last 12 months. That's despite government employment being down 645,000 jobs in that time, which explains the gap that you see in this chart.

But what made some hope that the Fed might back off was the lower amount of wage growth, at 0.3%, although I'll add that average hourly wages for non-supervisors was up a bit more at 0.4%, and 6.1% year-over-year. This seems pretty healthy to me, especially if those wage gains continue as gas prices go down, but corporate oligarchs likely don't want to see it.

But just because we have more jobs than February 2020, it doesn't mean we are looking at pre-2020 conditions. Warehousing/storage jobs are 464,000 above their pre-COVID levels, but jobs in hotels and bars and restaurants are still well below what they were, and growth is slowing down.

Now the question going forward is whether this lack of growth reflects an inability to find enough people to work these jobs, even if the demand is there (a factor cited in a few recent restaurant closings in Madison), or if it's a structural change where hotel business travel won't ever get back to what it was, and/or the market is saturated at this time.

I still don't see why the Fed should want to crush already-calming inflation at the expense of what is still a very good job market with wage growth - especially wage growth and advancement in the lower ends of the economy. But the stock markets sure seem to think that will happen, which is why the DOW has dropped nearly 2,000 points since Fed Chairman Powell opened up his mouth in Jackson Hole 9 days ago.

This tells me that the stock market and the jobs market might be two things that are at odds for each other in coming months, and it better be actual workers that win out in that equation. 300,000+ jobs and 3.7% unemployment is a pretty good spot to be in, and wrecking that to shave a couple of points off of CPI and gain a few more dollars in profit seems a bad trade-off to me.

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