“This is really what the Fed is hoping for,” former Fed governor and University of Chicago professor Randall Kroszner said on Bloomberg TV. “More people are coming back into the labour market. That helps to reduce the tightness of that market.”
The labour force participation rate — the share of the population that is working or looking for work — advanced to 62.4 per cent, matching the highest since March 2020. The rate for workers ages 25-54 rose by the most since June 2020 to 82.8 per cent. Teen participation also surged.
“Most of the new labour force entrants found work, particularly part-time, while the remainder of these new entrants are still searching,” Mizuho Financial Group Inc. economists Alex Pelle and Steven Ricchiuto said in a note. The number of people working part-time for economic reasons jumped for a second month.
The job gains were led by professional and business services, health care and retail trade. Leisure and hospitality posted the smallest payrolls gain since a decline in December 2020.
While a persistent mismatch between labour supply and demand has driven businesses to bid up wages, the report shows some encouraging signs that the two are coming more in line. Average hourly earnings rose 0.3 per cent from the prior month and were up 5.2 per cent from a year earlier.
Fed chairman Jerome Powell emphasised the “out of balance” nature of the labour market in a speech last week while also acknowledging that the combination of higher rates, slower growth and a softer labour market will “bring some pain” to households and businesses.
The report is also likely to be welcomed by President Joe Biden and his advisers as they struggle to craft a positive economic message amid hot inflation ahead of the midterm elections, where they are defending thin congressional majorities.
The Labor Department’s report also showed the average workweek was down slightly to 34.5 hours.
The number of people not in the labour force who currently want a job fell by 361,000 in August — the biggest decline in a year — suggesting solid wage growth and high inflation are driving people to look for work.
Other recent labour market data also paint a strong picture. Job openings edged up to 11.2 million in July, while applications for unemployment insurance last week dropped for a third consecutive week to a two-month low.
Bloomberg
