The August U.S. jobs report contained hints of a long-awaited increase in labor supply. The big question for the central bank is whether that can continue even as it attempts to engineer an economic slowdown.
The labor force participation rate jumped to 62.4% last month, pushing the unemployment rate up to 3.7% as the share of those entering the job market who managed to find work declined. But the influx of Americans looking for work still came in the context of continued strong job creation, which historically has been a necessary ingredient for enticing people into the job hunt.
That presents a new wrinkle for the Federal Reserve as it confronts the highest inflation in almost four decades. It has largely given up this year on waiting for increases in the supply of goods, services and labor — all of which have been curbed by the pandemic — to put downward pressure on consumer prices and worker pay. Instead, it has turned its focus to bringing down demand via rapid interest-rate increases.
