🎉 Party like it's 2019

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Happy Jobs Report Eve for those who observe. A quick programming note: Nightcap will be offline Monday for Labor Day. Cheers to the long weekend, friends.

By Allison Morrow

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Last updated August 31 at 7:44 PM ET

💸 PARTY LIKE IT'S 2019

This week's deluge of economic data offered a compelling, ultimately upbeat narrative for the US economy: We are finally, after more than two years of running a fever, getting back to a healthy temperature. Tomorrow's jobs report is expected to cement the idea that the economy is easing into a sweet spot of steady employment and cooling prices.

The question keeping Jay Powell up at night is whether that not-too-hot-not-too-cold homeostasis can be sustained, my colleague Alicia Wallace writes.

Here's the deal: The closely watched August jobs report, set to be released Friday at 8:30 a.m. ET, is expected to show a net gain of 170,000 jobs, with the unemployment rate holding at 3.5%.

That would be a chef's kiss result, because it would show that the labor market is cooling rather than cratering. A net gain of 170K, or thereabouts, would be just a bit lower than the 187K jobs added in July. And, crucially, it'd be roughly in line with the average we were used to seeing in the decade before the pandemic.

"We could be in a place where this 'Goldilocks' labor market is sustainable and continues for a long time," said Julia Pollak, chief economist with ZipRecruiter. "But there are also considerable risks that the porridge may cool down too much."

The jobless rate has calmly drifted between 3.4% and 3.7% for the past 18 months, which is around the lowest it's been in a half-century. Normally, you'd expect that rate to go up as a result of much higher interest rates. Most economists expected we'd be above 4% or even 5% unemployment.

There's now good reason to believe the labor market can sustain those levels, Pollak says.

"We know from the experience of 2015, '16, '17, '18, that the kinds of levels we're seeing now in the labor markets — the number of working hours, the quits rates, the rate of job growth — those can be sustained for a very, very long time," she said.

The slack that Powell and Co. have been seeking in the job market is finally showing up, as this week made clear. Job openings fell below 9 million for the first time in a year and a half. Hiring slowed, and fewer people quit their jobs.

Overall, the labor market is feeling very 2019 these days, and that is good news.

The bad news is we still don't have a crystal ball (despite our best efforts), and the violent jolt of the pandemic is still mucking things up.

So there are some signs of potential turbulence on the horizon:

Broad economic growth is up (yay!) but the pace is moderating.
The ever-reliable American consumer is still spending (yay!), but credit card debt is mounting and delinquencies are rising.
Interest rates and mortgage rates are the highest they've been in 22 years, and it's not clear when they'll come down, or whether they'll go higher.
And, of course, the big question mark hanging over the economy is whether consumers can keep up their spending spree come October, when student loan payments resume after a three-year reprieve. (More on that below...)

READ MORE

Consumer spending surged last month, even as inflation stayed high.
US mortgage rates ticked down this week, ending a five-week stretch of increases, but remained above 7% amid lingering inflation.

NUMBER OF THE DAY

$20 billion

Hurricane Idalia caused billions of dollars in damage, but the price tag won't be nearly as high as other major hurricanes, according to a preliminary report from Moody's Analytics.

Idalia's total financial cost could reach as high as $20 billion in damage and lost output. For context, Hurricane Ian caused an estimated $113 billion in damage when it hit Florida last year as a Category 4 storm.

The damage this time would have been far worse if not for Idalia's speed and the fact that it made landfall in a relatively less populous area.

💰 BILLS BILLS BILLS

Attention: Anyone who's about to have to start paying down their student loan debt again!

There is a little-known, and little-used, benefit that can help make those bills a bit less painful.

As my colleague Jeanne Sahadi writes, the IRS is reminding employers that they can offer up to $5,250 tax-free as part of their educational assistance benefits.

That $5,250 is the federal cap on the amount of tax-free money that employers may offer to help defray employees' qualified costs for their own education, including tuition and fees. (Reimbursements above that threshold are treated as taxable income to the employee.)

While companies have been allowed to offer such benefits for years, it's only since March 2020 that lawmakers have let employers offer those tax-free subsidies to offset the payment of principal and interest on their workers' federal and private student loans.

Buuuuut, for reasons that aren't totally clear, not many employers have chosen to include student loan debt in their educational assistance plans since those expenses were first allowed.

Only 8% of organizations said they offered student loan benefits to employees, according to a survey by the Society of Human Resource Management. By contrast, 48% said they offer tuition assistance.

Lawmakers who advocated for the benefit say there hasn't been enough public awareness of it, and they have asked the IRS to help.

The advantage for employers? In a tight labor market packed with Millennials who are drowning in student loan debt, any help lifting that burden could help attract and retain workers.

For adults working full-time while carrying debt, reimbursements of up to $5,250 a year shake out to about $438 a month.

The typical student loan payment before the 2020 suspension was between $200 and $300 a month, according to the Fed.

Bottom line: Tell your boss! If the IRS wants to give you a break, why not take it?

WHAT ELSE IS GOING ON?

✈️ An obscure London-based company supplied bogus parts for repairs of jet engines that power many older-generation Airbus and Boeing planes, European regulators say. (Bloomberg)

🚘 Labor Day weekend gas prices are near all-time highs. (CNN)

🔌 VanMoof, the bankrupt Dutch e-bike maker, has been acquired by Lavoie, an upscale electric scooter company. (NYT)

📉 Dollar General shares tumbled more than 12% after it slashed its sales and profit outlook for the year, blaming headwinds including weaker consumer spending on non-essential purchases and increasing theft. (CNN)

🇺🇸 The auto industry is spending billions to expand EV production in the American South, putting some smaller towns on edge as they brace for an influx of workers. (WSJ)