The US economy is showing signs of cracking, but the US jobs market remains solid.
Employers added 130,000 jobs in August. The unemployment rate remained steady at 3.7%.
The economy has gained jobs for 107 consecutive months, but the pace of hiring has slowed recently. The United States has added a monthly average of 158,000 jobs this year, compared to 223,000 in 2018.
Hiring got a big boost in advance of next year’s US census, as the government hired 25,000 temporary employees to help with the nationwide project.
Wages grew at a healthy 3.2% over the past year. That was somewhat better than economists expected and could help inflation, which has remained stubbornly low.
The African-American unemployment rate fell dramatically to 5.5% from 6%. That was a record low for the data, which have been collected since 1972. The decline was led by a sharp drop in the unemployment rate for black women.
Hispanic unemployment fell to 4.2% from 4.5%. The race-based unemployment rate is a sometimes volatile number.
Cracks are beginning to show
Despite the overall solid employment picture, weaknesses are beginning to show.
“It may in part be due to the difficulty in finding workers with the right skill sets given unemployment remains just 3.7%,” said James Knightley, chief international economist at ING. “However, given creeping caution about the international backdrop and uncertainty on trade, firms may be increasingly cautious about hiring too.”
The escalating trade war between the United States and China has injected hiring uncertainty in sectors feeling the effects of tariffs, such as manufacturing.
Only 3,000 jobs were added in that sector last month, below expectations–half this year’s average of 6,000 and less than a quarter compared with the July figure. In 2018, manufacturing job growth averaged 22,000 per month.
The US manufacturing sector contracted for the first time in three years in August, according to the Institute of Supply Management.
“The trade war isn’t pushing the economy over a cliff, and recession clouds are not darkening the skies, but the outlook remains a question mark as the China tariff headwinds have not reached full strength yet,” said Chris Rupkey, chief financial economist at MUFG.
Can the Fed save the day?
The cooling August report adds to expectations that the Federal Reserve will cut interest rates later this month, the second time this year. In July, the central bank made its first cut since the 2008 financial crisis.
Expectations for a quarter percentage point cut at the September 18 meeting are at 94%.
