US labor market encourages a halt to rate hikes

Since the Fed stopped raising interest rates last week in response to improved US employment data, one of the crucial steps toward reducing inflationary pressures is to loosen up the labor market. The lower revision of last month’s numbers and the lowest job creation in recent months in this regard indicate hints of deceleration in a still tense labor market, even though job creation was above consensus estimates.

A large downward revision of the data for the preceding two months, which removed 110,000 jobs from the previously reported data, overshadowed official figures for August that showed job creation reached 187,000 new jobs, exceeding expectations (170,000 projected).

Additionally, according to the employment survey, the unemployment rate for the economy increased by three tenths to 3.8%, higher than expected. This was largely the result of a rise in the participation rate, which increased by two tenths to 62.8%, indicating that workers are returning to the labor force and a factor that should help reduce wage inflationary pressures. The figures on this particular issue also supported the easing of tensions, as the rate of growth in hourly wages slowed to +0.2% month over month from +0.4% in the previous month, putting wage growth at +4.3% year over year.