Economy shows resilience with solid Aug. jobs report

Hiring slowed enough to help Fed in fight against inflation

WASHINGTON — America’s employers added a healthy number of jobs last month, yet slowed their hiring enough to potentially help the Federal Reserve in its fight to reduce raging inflation.

The economy gained 315,000 jobs in August, a still-solid figure that pointed to an economy that remains resilient despite rising interest rates, high inflation and sluggish consumer spending. Friday’s report from the government also showed that the unemployment rate rose to 3.7%, up from a half-century low of 3.5%. Yet that increase was also an encouraging sign: It reflected a long-awaited rise in the number of Americans who came off the sidelines and started looking for work.

“It’s a very positive report and still holds open the possibility for a soft landing,” said Ellen Gaske, an economist at PGIM Fixed Income, referring to the Fed’s goal of slowing the economy enough to cool inflation without going so far as to cause a recession.

Prices are rising at nearly the fastest pace in 40 years, which has handed congressional Republicans a hammer to use against Democrats in the fall congressional elections. Texas Republican Rep. Kevin Brady noted Friday that rising wages aren’t keeping up with inflation, leaving Americans with “shrinking paychecks.”

The White House, in turn, has claimed credit for a robust pace of job growth. On Friday, Brian Deese, a top economic adviser to President Joe Biden, said in an interview on CNBC that the economy is shifting to a more sustainable path.

“We want to see a transition from a very strong economy to one of stable growth,” he said.

The August hiring gain was down from 526,000 jobs added in July, and it fell below the average gain of the previous three months. Wage growth also weakened a bit last month, which could also serve the Fed’s inflation fight. Average hourly pay rose 0.3% from the previous month, the smallest gain since April. Businesses typically pass the cost of higher wages on to their customers through higher prices, thereby fueling inflation.

Gaske suggested that the figures could allow the Fed to raise its benchmark shortterm interest rate by a half-percentage point at its next meeting this month, rather than by three-quarters of a point, as many Wall Street traders and some economists have expected.

When the Fed increases its rate, it leads over time to higher rates on mortgages, auto loans and business borrowing and can weaken the economy.

The Fed is rapidly raising interest rates to try to cool hiring and wage growth, which have been consistently strong. Fed officials hope that by raising borrowing costs across the economy, they can reduce inflation from a near-40-year high.

Most industries added workers last month, with the biggest increases in professional and business services, which gained 68,000 jobs. That sector includes architects, engineers and some tech workers. Health care added 61,500 jobs, retailers 44,000.