US companies added 187,000 jobs in August, unemployment at 3.8%

The Labor Department reported Friday that US employers added 187,000 jobs last month, more than the 170,000 that was forecast by economists, according to the data firm FactSet.

The federal government also said that the unemployment rate rose to 3.8%.

The Labor Department also reported that US average hourly wages rose 0.2% in August compared to the previous month. Wages were also up 4.3% compared to a year ago.

News of the rise in unemployment and the drops in wages sent stocks spiking in premarket activity as traders bet on a lower likelihood that the Federal Reserve will hike interest rates at its next policy meeting.

“We are beginning to see this slow glide into a cooler labor market,’’ said Becky Frankiewicz, chief commercial officer at the employment firm ManpowerGroup.

“Make no mistake: Demand is cooling off. … But it’s not a freefall.’’

Manufacturing payrolls rose by 16,000 compared to the previous month, according to Labor Department data.

The latest sign that the pace of hiring is losing some momentum — without going into a nosedive — would be welcomed by the Federal Reserve, which has been trying to tame inflation with a series of 11 interest rate hikes.

The Fed is hoping to achieve a rare “soft landing,” in which it would manage to slow hiring and growth enough to cool price increases without tipping the world’s largest economy into a recession.

Economists have long been skeptical that the Fed’s policymakers would succeed.

But optimism has been growing.

Since peaking at 9.1% in June 2022, year-over-year inflation has dropped more or less steadily.

It was 3.2% in July.

But the economy, though growing more slowly than it did during the boom that followed the pandemic recession of 2020, has defied the squeeze of increasingly high borrowing costs.

The gross domestic product — the economy’s total output of goods and services — rose at a respectable 2.1% annual rate from April to June.

Consumers continued to spend, and businesses increased their investments.

The Fed wants to see hiring decelerate because strong demand for workers tends to inflate wages and feed inflation.

So far, the job market has been cooling in the least painful way possible — with few layoffs.

The unemployment rate is expected to have stayed at 3.5% in August, barely above a 50-year low.

And the Labor Department reported Thursday that the number of Americans applying for unemployment benefits — a proxy for job cuts — fell for a third straight week.

“Employers aren’t wanting to let their existing talent go,’’ Frankiewicz said.

Instead of slashing jobs, companies are posting fewer openings — 8.8 million in July, the fewest since March 2021.

And American workers are less likely to leave their jobs in search of better pay, benefits and working conditions elsewhere.

In July, 3.5 million people quit their jobs, the fewest since Feb. 2021.

A lower pace of quits tends to ease pressure on companies to raise pay to keep their existing employees or to attract new ones.

Average hourly earnings aren’t growing as fast as they did last year, either. In March 2022, average wages were up 5.9% from a year earlier.

In August, they’re expected to be up just 4.4%, the same as in July.

Nancy Vanden Houten, lead US economist at Oxford Economics, noted, though, that annual average pay increases need to slow to around 3.5% to be consistent with the Fed’s 2% inflation target.

Still, economists and financial market analysts increasingly think the Fed may be done raising interest rates.

Nearly nine in 10 analysts surveyed by the CME Group expect the Fed to leave rates unchanged at its next meeting on Sept. 19-20.