Job growth remains resilient, economy falters — RISMedia

Despite pressure from the Federal Reserve and various market headwinds, the labor market continued to defy expectations, posting another month of positive growth as the economy added 315,000 jobs in August, according to the latest data. from the Bureau of Labor Statistics (BLS).

“The Fed had hoped to see a slower pace of job growth after July’s very strong jobs report, but the August data shows that the labor market continues to be very hot,” the Fed said. Dr. Lisa Sturtevant, chief economist for Bright MLS, in a report.

This month’s report was perhaps the most watched in 2022, and also represented a much smaller increase than July’s 526,000 new jobs. Policymakers have mostly agreed that the pace of labor market growth is unsustainable and needs to slow, hopefully without collapsing.

Investors reacted positively to the report, with all three major indices up around 1% in early trading on Friday.

“While the labor market remains fairly strong, with job growth still above a sustainable pace…that pace is slowing,” Mortgage Banker Association vice president and chief economist Mike Fratantoni said in a statement. a statement. “Wage growth is still strong, with average hourly earnings up 5.2% from a year ago.”

Payrolls in residential construction were up 10,900 from last month and 118,700 from a year ago. Late last year, homebuilder advocates said the industry needed to add 2.2 million new jobs to offset retirements and meet demand.

Unemployment also increased, from 3.5% to 3.7%. Many economists have pointed to the low unemployment rate as a sign that the economy is not as struggling as other data indicate.

“The direction of change is concerning, but the overall low is still a sign of a robust economy,” Joel Berner, senior economic research analyst at realtor.com®, said in a statement. “The low unemployment rate and the imbalance between job offers and job seekers have led to wage increases.”

Wages continue to rise, still far from the pace of inflation, but still up 5.2% from a year ago.

Following three interest rate hikes by the Federal Reserve, observers expected the labor market to slow faster or more significantly as inflation showed the first signs of a spike. It remains to be seen how this latest report will affect the central bank’s decision to raise rates again in September.

Sturtevant thinks this report will be enough to push Fed Chairman Jerome Powell to enact another big hike in the benchmark rate.

“The Fed will have no choice but to raise rates again later this month, probably another three-quarters of a percentage point,” she said. “This rate hike will impact the already sluggish housing market by pushing mortgage rates even higher, with a growing likelihood that we will see average 30-year fixed rate mortgage rates hit 6%.”

Prior to this jobs report, Fannie Mae predicted rates would average around 4.7% in the first quarter of 2023. Rates have been volatile over the summer as markets try to price in actions of a much more aggressive Fed.

Frantantoni agreed that the jobs report would almost certainly precipitate further rate hikes, taking a more optimistic view of how the housing market might react.

“We expect the Federal Reserve to stay the course with further rate hikes in upcoming meetings,” he said. The housing market is in affordability shock due to soaring mortgage rates and much higher home prices. While this data does not promise any near-term rate relief, the strength of the labor market will continue to support housing demand as household incomes continue to grow at a healthy pace.

Berner saw the relatively positive jobs report as potentially masking much deeper issues for everyday consumers, as well as the economy as a whole, which still faces a host of challenges.

“Rising prices, coupled with a relatively weak stock market, create a murky backdrop for good jobs news and stoke fears about the possibility of a recession,” he said. “At the individual level, Americans are facing slow wage growth, rising prices for consumer goods, and rapidly rising monthly costs of renting or buying homes.”

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