By CHRISTOPHER RUGABER
AP Economics Writer
WASHINGTON (AP) — America’s employers slowed their hiring in August in the face of rising interest rates, high inflation and sluggish consumer spending but still added 315,000 jobs.
The government reported Friday that last month’s job gain was down from 526,000 in July and below the average gain of the previous three months. The unemployment rate rose to 3.7%, from a half-century low of 3.5% in July, as more Americans came off the sidelines to look for jobs.
Even though the job gain declined from July, the report still pointed to a resilient labor market and an economy that is not near recession. The number of people looking for work jumped last month, which boosted the unemployment rate because not all of them found jobs immediately. The influx of job seekers should help employers fill a near-record number of openings in the coming months.
The smaller August gain will likely be welcomed by the Federal Reserve. The Fed is rapidly raising interest rates to try to cool hiring and wage growth, which have been consistently strong. Businesses typically pass the cost of higher wages on to their customers through higher prices, thereby fueling inflation.
Fed officials hope that by raising borrowing costs across the economy, they can reduce inflation from a near-40-year high. Some economists fear, though, that the Fed is tightening credit so aggressively that it will eventually tip the economy into recession.
Chair Jerome Powell and other Fed officials have increasingly stressed their determination to tame inflation even at the cost of damaging the economy. In a major speech in Jackson Hole, Wyoming last week, Powell underscored the Fed’s tight focus on curbing inflation and said he was prepared to continue raising short-term interest rates and keep them elevated to achieve that goal. He warned that the Fed’s inflation fight would likely cause pain for Americans in the form of a weaker economy and job losses.
The stock market has fallen every day since that speech as fears that the Fed may cause a recession have escalated.
Powell also said the job market is “clearly out of balance,” with demand for workers “substantially exceeding” the available supply. Indeed, the government reported this week that the number of available jobs rose in July to a near-record high, after three months of declines. There are roughly two open jobs for every unemployed worker, a sign that many companies are still desperate to hire and may keep raising wages to do so.
“I don’t think the Fed is rooting for a poor jobs report, but they are certainly not rooting for a repeat of July,” when hiring accelerated and wage increases were strong, said Gregory Daco, chief economist at Parthenon-EY. “They are going to want to see some moderation.”
The central bank has raised its short-term rate to a range of 2.25% to 2.5% this year, after the fastest series of increases since it began using its short-term rate to influence the economy in the early 1990s. It has projected that its key rate will reach a range of 3.25% to 3.5% by year’s end. Those rate hikes have made borrowing and spending steadily more expensive for individuals and businesses. The housing market, in particular, has been weakened by higher loan rates.