The U.S. economy added 315,000 non-farm jobs in August, better than the consensus estimate of 298,000 from Bloomberg, but the unemployment rate rose to 3.7% from 3.5% in July, the U.S. Bureau of Labor Statistics reported Friday.
BLS noted, however, that while professional and business services, health care, and retail saw "notable job gains," the number of unemployed people increased by 344,000 to 6 million in August as more people rejoined the labor force.
The August report followed a very strong July when U.S. firms added 526,000 jobs as the unemployment rate slipped to 3.5% from 3.6% in June.
The still strong job market comes amidst an ongoing tightening by the Federal Reserve. On July 27, the central bank enacted its second consecutive 75 basis point rate hike, taking the Fed Funds Rate to a range of 2.25%-2.5%.
Moreover, in a speech delivered at Jackson Hole, Wyo., on Aug. 26, Federal Reserve Chairman Jerome Powell took a hawkish stance, suggesting more rate hikes were likely to tame inflation. "While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses," Mr Powell warned in the speech. "These are the unfortunate costs of reducing inflation."
Brian Nick, New York-based chief investment strategist at Nuveen, said in an interview on Friday that this jobs report was "as good as we could possibly expect." He described it as a "Goldilocks report – not too hot, not too cold."
"The July report was 'too hot' and gave the Fed more ammunition to keep aggressively hiking interest rates," he said. "But the August report showed some signs of slack in the job market and economy and might lead to some pressures on wages and inflation. As such, I think it means the Fed will probably keep hiking rates, but not as aggressively as previously thought – perhaps by 50 basis points each through the end of the year and not by 75."
Mr. Nick added that "overall, this is a very good report for investors who were fearful of more tighter Fed monetary policy."
Nuveen had about $1.1 trillion in assets under management as of June 30, 2022.
Luke Bartholomew, London-based senior economist at abrdn, said by email that the Fed "will welcome both the slowing in employment growth and the pick-up in participation, both of which are necessary adjustments to restore price stability." However, he cautioned that the economy is "still running too hot" given the underlying pace of labor force growth and broader supply constraints.
"As such, the Fed will continue to stick to its hawkish guns," he added. "So markets should not take too much comfort from this month's number."
Abrdn had AUM of £508 billion ($617.7 billion) as of June 30.
Wiley Angell, St. Louis-based chief market strategist at Ziegler Capital Management, said by email that although the unemployment rate increased, this will be perceived as a good thing by the Fed as the labor participation rate increased.
"The Federal Reserve is likely to continue their position of restoring price level stability," he said. "Although that will likely continue to cause some short-term pain, longer term investors can benefit from these actions. Decades of price level stability resulted in sustained economic growth, rising equity markets and declining interest rates. The Fed appears to be focused on this goal and the jobs numbers today will only embolden them to continue."
Ziegler has $8 billion in AUM.
