Jobs Report Lower; Unemployment Rate Drops

Total nonfarm payroll employment came in lower than expected, increasing by 173,000 jobs in August, the Labor Department reported on Friday.  
The report said the unemployment rate edged down to 5.1 percent. The number of unemployed persons fell to 8.0 million. Over the year, the unemployment rate and the number of unemployed persons fell by 1.0 percentage point and 1.5 million, respectively.  

BLS revised June employment numbers from +231,000 to +245,000 and revised July’s numbers from +215,000 to +245,000. With these revisions, employment gains in June and July combined were 44,000 more than previously reported. Over the past three months, job gains have averaged 221,000 per month. Over the prior 12 months, employment growth averaged 247,000 per month.  

BLS said the civilian labor force participation rate remained unchanged at 62.6 percent for the third consecutive month. The employment-population ratio, at 59.4 percent, was also unchanged in August and had moved little this year. The number of persons employed part time for economic reasons was unchanged in August at 6.5 million.  

John Silvia, chief economist with Wells Fargo Securities, Charlotte, N.C., said the employment numbers suggest employment conditions could use some additional improvement.  

“August has a history of a lower initial estimate for jobs, and we expect that this pattern will be repeated again,” Silvia said. “These observations, plus the data reviewed below, meets the Fed’s requirement for some additional improvement in the labor market. This keeps the Fed on course to begin to lift short-term interest rates in September.”  

BLS reported the average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.6 hours in August. The manufacturing workweek was unchanged at 40.8 hours, while factory overtime edged down by 0.1 hour to 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.7 hours.  

The report said average hourly earnings for all employees on private nonfarm payrolls in August rose by 8 cents to $25.09, following a 6-cent gain in July. Hourly earnings have risen by 2.2 percent over the year. Average hourly earnings of private-sector production and nonsupervisory employees increased by 5 cents to $21.07.  

“For [Federal Open Market Committee] actions in September the projection of inflation, not the current pace of inflation, remains the focus of policy,” Silvia said. “From the FOMC’s view, current low inflation is discounted due to temporary conditions…We expect the FOMC to raise rates in September.”  

This Week:

• Tuesday:  MBA Commercial/Multifamily Quarterly Delinquency Report; Consumer Credit, Federal Reserve
• Wednesday: MBA Weekly Applications Survey; JOLTS (Job Openings & Labor Turnover Survey), Bureau of Labor Statistics
• Thursday: Imports/Exports, Bureau of Labor Statistics; Wholesale Trade, Census Bureau
• Friday: Producer Price Index, Bureau of Labor Statistics; U. of Mich. Consumer Sentiment (prelim); U. of Mich. Inflation Expectations (prelim)