Unemployment rate edged down in August, all eyes on Fed’s next move: CEI analysis

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August's jobs numbers show an addition of 142,000 jobs to the economy, edging the unemployment rate down to 4.2 percent compared to July's 4.3 percent. The focus now is on how this report will affect the Fed's interest rate decision later this month and if the Labor Department can keep up with the ever-changing job market.

CEI senior economist Ryan Young:

"The unemployment rate slightly improved, from 4.3 percent to 4.2 percent. This ends a four-month string of rising unemployment rates, though for context, anything under 5 percent is a good reading.

"The bigger story is how this will affect the Federal Reserve's September 18 interest rate decision. Fed Chair Jerome Powell has said the Fed will stop focusing solely on inflation so it can stimulate the labor market if unemployment goes up.

"This month's stable reading hopefully gives the Fed the courage to stick to fighting inflation. Job creation is better left to entrepreneurs than to monetary policy-especially since the tradeoff to Fed stimulus is more inflation.​"

CEI research fellow Sean Higgins:

"Friday's report that the economy added 142,000 jobs in August was in line with forecasts, nudging the official unemployment rate downward marginally to 4.2 percent, and is further proof that employers are pulling back on hiring. Monthly job gains were regularly well above 200,000 earlier in the year. Employers are getting by with fewer workers through automation and revamping their practices. The labor market no longer favors workers the way it did just a year ago.

"Employers are still looking for workers and are willing to pay a premium for them. Wages went up by 14 cents in August and are up by 3.8 percent over the year. But the labor force participation rate didn't budge, staying 62.7 percent and the number of long term unemployed likewise remained stuck at 1.5 million. Employers cannot find the people they need and so they are simply going without.

"These numbers should be taken with a grain of salt. The Labor Department has struggled to keep up with the rapidly changing nature of the workforce. It has had to revise its data numerous times in recent months, including August's announcement that 818,000 fewer jobs were created between March 2023 and March 2024 than it previously reported."