August employment: More than a participation trophy
|Summary
The August jobs report offered the latest piece of evidence that the Fed's "soft landing" prospects remain alive. Nonfarm payrolls rose a respectable 187K, while the labor market loosened in all the right ways. The unemployment rate rose to 3.8% – the highest since the Fed began tightening policy in March of 2022 due to a swell of workers entering the labor force. The labor force participation rate rose to a fresh cycle high of 62.8% and overwhelmed another increase (+222K) in the household measure of employment. Average hourly earnings growth also eased slightly, with wages up 0.2% in August and 4.3% over the past year.
With the labor market more clearly moving back into balance, further Fed rate hikes seem unlikely in our view. However, with the labor market still tight and wage growth elevated, we expect rate cuts remains a ways off.
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