The Labor Department will issue its August employment report on Friday. Here’s what to expect. This report will provide a very important update on the U.S. labor market. This report will show just how many jobs were added this month on the first Friday in October. Perhaps most importantly, it will display the now outdated current unemployment rate of 4.2%. Analysts have their eyes glued to these numbers. Early signs already point to a labor market that is softening, as best evidenced by Black workers now experiencing the highest unemployment rate of 5.9%.
Concerns over inflation have only increased in the past few weeks. That’s particularly the case for the Personal Consumption Expenditures (PCE) price index, which the Federal Reserve has adopted as its preferred measure of inflation. The PCE has reflected large price spikes in strategic goods targeted by tariffs, like household furnishings and refrigerators. The Fed’s looking greatly increasing odds to cut borrowing costs for the first time since December. That announcement comes in only two weeks from now.
Economic Indicators and Labor Market Trends
Our next jobs report will be a key signpost for the Federal Reserve. It will send a key signal to Wall Street about the overall health of the U.S. economy. Most analysts are expecting the data coming over the next 10 business days will shed greater light on economic trends.
While the state has continued to keep a low unemployment rate (4.2%), certain industries are starting to feel the stress. Unlike during the pandemic, new applications for unemployment benefits haven’t been skyrocketing. Companies are learning how to react by reducing hours for workers and delaying wage hikes. Even as businesses show willingness to hire across some sectors, such a cautious mode injects uncertainty into future employment sustainability.
What is most alarming about the current economy is the surge in the unemployment rate of Black workers. Minneapolis Fed President Neel Kashkari noted, “When economic downturns happen, oftentimes Black and Brown Americans lose their jobs first, or they get hired last.” This sentiment speaks to more systemic equity-related challenges in the job market that are likely intensified by an overall economic downturn.
Inflation and Tariff Impacts
Inflation is still a hot button issue with multiple reports confirming that prices are still climbing. Cleveland Fed President Beth Hammack articulated her concerns, stating, “I see an inflation picture that is too high and rising, and moving in the wrong direction.” The latest PCE index continues to indicate that inflation is remaining more persistent. Still, most central bankers seem pretty sure that tariff-induced price hikes are fleeting.
San Francisco Fed President Mary Daly emphasized this point, declaring that “tariff-related price increases will be a one-off.” Likewise, Federal Reserve Chair Jerome Powell hinted at a dangerous optimism regarding inflation’s future direction. He remarked, “A pretty reasonable base case is that this will be a one-time price increase, and in the end, we’ll make sure that that’s the case.”
St. Louis Fed President Alberto Musalem added to this discourse by stating, “As a baseline, I expect the effects of tariffs will work through the economy over the next two to three quarters and the impact on inflation will fade after that.” Other County officials share his concern, warning that inflation will likely soar as a result of tariffs. They don’t think it’s likely to stick around as a more permanent feature to the economy.
Federal Reserve’s Dilemma
The Federal Reserve’s challenge going forward may prove more difficult still, as it walks the tightrope between its dual mandate of stable prices and maximum employment. The economy today has led many to liken the situation to the stagflation catastrophe of the 1970s and early 1980s. Some Fed officials are sounding the alarm on pursuing an interest rate cut under the current economic conditions.
Atlanta Fed President Raphael Bostic indicated that only one rate cut “will be appropriate over the remainder of this year.” In stark contrast, St. Louis Fed President Musalem has been concerned about knee-jerk interest rate cuts from data that’s “not even stale yet.” This divergence illustrates the weirdness behind the Federal Reserve’s curtain. Our members disagree on the best way to fight inflation while promoting job growth.
Although many firms continue to hire, they’re hiring with a mind towards keeping costs down. As one private employment agency in upstate New York reported this week, job orders are down. Additionally, workers are remaining in their jobs for record lengths of time causing turnover rates to plummet. As communities look to spur economic recovery, this trend stands to make it even harder.