Hello, my name is Brandon Hall, and I’m a research analyst at J.P. Morgan Asset Management, here to share our thoughts on the August jobs report.
At last week’s Jackson Hole conference, Federal Reserve Chairman Powell emphasized the importance of the labor market in the Fed’s calculus. He delivered a moderately hawkish speech that left the door open for further tightening, and suggested that core services ex. housing inflation, a.k.a the stickier segment of inflation, is more sensitive to wage growth than it is to interest rates.
Fortunately, the August Jobs report provided more evidence that the labor market is softening. 187 thousand payroll jobs were added in August, above expectations for 170 thousand. However, and importantly, backward revisions removed a hefty 110 thousand job gains from the prior two months. This brings the three-month moving average of payroll job gains down to 150 thousand, its lowest level since the recovery from the pandemic.
There were some special factors weighing on job growth this month. In particular, truck transportation saw a 37 thousand loss in jobs, reflecting the closure of the Yellow trucking company. Employment in motion pictures dropped by 17 thousand due to the strike by actors and writers. Equally significant, the highly cyclical temporary help services sector saw a 19 thousand decline in jobs following a 24 thousand cut in July.
The household survey also showed some progress, as the labor force participation rate increased, although the unemployment rate rose to 3.8%.
The Fed has remained focused on wage growth, which rose by a modest 0.2% m/m for all workers, slightly below expectations. Wages are up 4.3% from a year ago, well below last year’s peak of 5.9%, and in line with the trend we’ve seen over the past few months.
Overall, with slowing job gains, a low unemployment rate, and easing wage pressures, the Fed should be pleased with this report. The lagged effects of tighter monetary policy are becoming more apparent in the data, and easing wage growth should allow core services ex. housing inflation to move lower in the coming months. Additionally, with the unemployment rate so low, a recession looks unlikely this year.
Looking forward, the Fed is set to meet later this month, and another rate hike seems all the less necessary and all the less likely. Futures markets are now pricing in only a 36% chance of another rate hike by November compared to 48% before the report. However, the current economic environment is a complicated one, and even if recent economic data suggest continued resilience, the Fed’s intention to remain hawkish and the increasing burden of its aggressive monetary tightening could weigh on economic growth and markets in the year ahead.
Thank you for watching. For more of our insights on inflation, the economy and investing you can check out our website at jpmorganfunds.com/insights or our mobile app “Insights” by J.P. Morgan Asset Management.
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This content is intended for information only based on assumptions and current market conditions and are subject to change. No warranty of accuracy is given. This content does not contain sufficient information to support investment decisions. It is not to be construed as research, legal, regulatory, tax, accounting or investment advice. Investments involve risks. Investors should seek professional advice or make an independent evaluation before investing. The value of investments and the income from them may fluctuate including loss of capital. Past performance and yield are not indicative of current or future results. Forecasts and estimates may or may not come to pass. JPMorgan Asset Management is the asset management business of JPMorgan Chase & Co and its affiliates worldwide.