Nick Rummell

MANHATTAN (CN) — In a crucial employment report, the federal government said Friday that 187,000 new jobs were added to the economy in August, further cementing the possibility of avoiding a recession while combatting inflation.

The number is slightly higher than the 170,000 jobs most analysts had predicted, but it is not so high that it would worry regulators looking to tame inflation. The unemployment rate is at 3.8%, a bit of a jump from July but not overly concerning since it is only slightly higher than the numbers from a year ago.

June’s jobs report was revised down by 80,000 jobs, while July’s report was also revised downward by 30,000 jobs, adding fodder to the idea that the labor market continues to loosen thanks to the Federal Reserve's efforts on inflation and averting recession.

The White House lauded the numbers. “We created more jobs in two years than any president ever created in a single four-year term,” President Joe Biden said, taking a swipe at former President Trump being only one of two presidents to leave office with fewer jobs than when he entered the Oval Office. “We’ve recovered all the jobs lost during the pandemic, and we’ve added a million more new jobs.

A number of sectors lost jobs in August, most notably transportation and warehousing, which shed 34,000 jobs, while temporary help service employment fell by 19,000 jobs. However, construction continued its upward trend, gaining 22,000 jobs, while leisure and hospitality also kept riding the recent wave by adding 40,000 jobs.

The job report was well received by markets, since it gives weight to the possibility that the Fed will skip a rate hike at its next meeting and may keep the federal funds rate at the current 5.25% to 5.5% range to cap off the year.

Wall Street also viewed the report’s slight 0.2% increase in hourly earnings as a positive that will likely help curb inflation.

“The Fed couldn’t hope for a better report in their fight against inflation,” said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance. “The stock market should cheer this data since it removes the risk of a Fed rate hike in September, and if these trends continue they may not need to raise rates again this year.”

However, some experts are not as keen to call the report a Goldilocks-type release. Peter Boockvar, chief investment officer at Bleakley Advisory Services, said the term was coined in the 1990s when growth was strong and inflation was low. “We now have, at best, very modest growth and a comedown from a 40-year-high inflation,” he said. “Nothing Goldilocks about that, especially now that hiring is also slowing.”

Earlier in the week, another jobs report from payroll company ADP showed that private employers added 177,000 jobs in August — still a robust number but far less than the 324,000 jobs gained in July and 455,000 jobs added in June. Private employment now sits at just under 129 million jobs, according to ADP, about five million more than when the pandemic struck in early 2020.

“This month’s numbers are consistent with the pace of job creation before the pandemic,” said ADP Chief Economist Nela Richardson in a statement. “After two years of exceptional gains tied to the recovery, we’re moving toward more sustainable growth in pay and employment as the economic effects of the pandemic recede.”

According to the report, service-providing jobs represented nearly all the gains, with 154,000 jobs. Medium-sized and large employers saw most of the gains. Companies with fewer than 50 employees netted just 18,000 jobs last month.

Wage growth also continued its slowdown, with a year-over-year increase of 5.9%, the slowest rate since October of last year. For employees changing jobs, wage growth also dipped to a 9.5% increase, a positive but slowing number.

Analysts were largely pleased with the ADP numbers, as they indicate loosening economic conditions. “The labor market is cooling and is taking pressure of policymakers concerned with a second wave of inflation,” said Jeffrey Roach, chief economist at LPL Financial, on Wednesday. “Businesses should get some respite as inflation decelerates and the risk of quiet quitting dissipates.”

Earlier in the week, the U.S. Bureau of Labor Statistics reported that job openings had decreased slightly, to 8.8 million, a larger fall than expected. The quits rate in the same government report showed a slight decrease and is now at pre-Covid levels. The hires rate also fell to 3.7%, down from its peak of 4.6% in November 2021, according to the BLS report.

“While most Americans who want a job have one, it is not as easy to find new work as a year ago,” said Bill Adams, chief economist at Comerica Bank.