Softening Labor Market Could Point to Slower Tightening by the Fed

September 5, 2023

Softening Labor Market Could Point to Slower Tightening by the Fed Photo

Due to the observance of Labor Day, we are releasing our Monday Morning Perspectives today. Hopefully, everyone had a nice, relaxing long weekend!

Last Friday began with the release of the August jobs report.1 The U.S. economy added 187,000 jobs last month (well below the key figure of 200,000), while payrolls in June and July were revised down a combined 110,000, resulting in a three-month (June through August) average of 150,000 added, down from a 238,000 average gain between March and May.2 The unemployment rate unexpectedly rose to 3.8% from 3.5%, the highest since February 2022 — reflecting more Americans seeking work. The number of unemployed people increased by 514,000 to 6.4 million, employment levels rose by 222,000 to 161.5 million and the labor force participation rate increased to 62.8% from 62.6%, the highest since February 2020. Economists had expected unemployment to remain unchanged at 3.5%.

The August jobs report indicates the kind of cooling labor market that the Federal Reserve (Fed) has been trying to reach — and should keep the Fed on track to hold rates steady at its meeting this month. It does not, however, do enough to resolve the debate over whether it will raise rates again in November or December — as other data, such as consumer spending over the summer months, shows the broader economy remains strong. Shortly after the jobs report was released on Friday, Cleveland Fed President Loretta Mester told a European Central Bank conference, “In the labor market, some progress is being made in bringing demand and supply into better balance, but the job market is still strong,” signaling that she is not yet convinced that the Fed has gone far enough with rate hikes.3

This shortened work week will be relatively light from an economic reports standpoint. The factory orders report is expected to be released this morning, while the Fed Beige Book is due out tomorrow.4 Toward the end of the week, initial and continuing jobless claims reports are expected on Thursday, with the week wrapping up with the consumer credit report on Friday.




1Bureau of Labor Statistics – August Employment Situation; 9/1/23

2Reuters – US unemployment rate spikes to 3.8%; labor market still has momentum; 9/1/23 – Fed seen likely done with rate hikes as job market cools; 9/1/23

4MarketWatch – U.S. Economic Calendar; as of 9/5/23

Tags: Jobs report | U.S. economy | Unemployment rate | Labor market | Federal Reserve

< Go to Monday Morning Perspectives

This blog post is for informational use only. The views expressed are those of the author(s), and do not necessarily reflect the views of Penn Mutual Asset Management. This material is not intended to be relied upon as a forecast, research or investment advice, and it is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.

Any statements about financial and company performance of The Penn Mutual Life Insurance Company or its insurance subsidiaries (each, “Client”) made by the author is provided with a written consent from the Client.  Penn Mutual Asset Management is a wholly owned subsidiary of The Penn Mutual Life Insurance Company.

Opinions and statements of financial market trends that are based on current market conditions constitute judgment of the author and are subject to change without notice.  The information and opinions contained in this material are derived from sources deemed to be reliable but should not be assumed to be accurate or complete.  Statements that reflect projections or expectations of future financial or economic performance of the markets may be considered forward-looking statements.  Actual results may differ significantly.  Any forecasts contained in this material are based on various estimates and assumptions, and there can be no assurance that such estimates or assumptions will prove accurate.

Investing involves risk, including possible loss of principal.  Past performance is no guarantee of future results.  All information referenced in preparation of this material has been obtained from sources believed to be reliable, but accuracy and completeness are not guaranteed. There is no representation or warranty as to the accuracy of the information and Penn Mutual Asset Management shall have no liability for decisions based upon such information.

High-Yield bonds are subject to greater fluctuations in value and risk of loss of income and principal. Investing in higher yielding, lower rated corporate bonds have a greater risk of price fluctuations and loss of principal and income than U.S. Treasury bonds and bills. Government securities offer a higher degree of safety and are guaranteed as to the timely payment of principal and interest if held to maturity.

All trademarks are the property of their respective owners. This material may not be reproduced in whole or in part in any form, or referred to in any other publication, without express written permission.

Subscribe to Our Publications