August Job Growth Cools
Employers added 130,000 jobs in August, below most economists’ expectations, the Bureau of Labor Statistics said on Friday.
The unemployment rate held steady at 3.7 percent for the third consecutive month.
BLS revised June’s payroll employment report down by 15,000 from +193,000 to +178,000; and revised July numbers down by 5,000, from +164,000 to +159,000. After revisions, job gains have averaged 156,000 per month over the past three months.
The report said the number of unemployed persons was essentially unchanged at 6.0 million. The labor force participation rate edged up to 63.2 percent in August but has shown little change, on net, thus far this year. The employment-population ratio, at 60.9 percent, also edged up over the month and is up by 0.6 percentage point over the year.
“As expected, given the global slowdown in economic growth, and increasing signs of a slowing in the pace of U.S growth, we are seeing job gains cool down a bit,” said Mike Fratantoni, chief economist with the Mortgage Bankers Association. “August’s 130,000 increase in jobs was somewhat supported by federal government hires for the decennial Census, with private growth of only 96,000 jobs. We expect that job growth will continue to wane, and that there will be some upward pressure on the unemployment rate over the next year.”
That said, Fratantoni noted, “the unemployment rate remains remarkably low, wage growth continues to be steady and also well above the rate of inflation. With more purchasing power and low mortgage rates, we expect to see continued strength in the housing market.”
The report said average hourly earnings for all employees on private nonfarm payrolls in August rose by 11 cents to $28.11, following 9-cent gains in both June and July. Over the past 12 months, average hourly earnings have increased by 3.2 percent. In August, average hourly earnings of private-sector production and nonsupervisory employees rose by 11 cents to $23.59.
BLS said the average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.4 hours in August. In manufacturing, the average workweek increased by 0.2 hour to 40.6 hours, and overtime declined by 0.1 hour to 3.2 hours. The average workweek of private-sector production and nonsupervisory employees increased by 0.1 hour to 33.6 hours.
Sarah House, senior economist with Wells Fargo Securities, Charlotte, N.C., said the slower August hiring numbers suggest more easing from the Federal Reserve.
“Even with a 25K bump from Census hiring, employment growth slowed to 130K in August,” House said. “The pickup in wage growth and steady unemployment rate are unlikely to deter the Fed from a 25 bps cut this month.”
House noted although there were a few good numbers in the August employment report, including stronger wage growth, rising labor force participation and a rebound in the average workweek, “a broad slowdown in hiring cannot be ignored.”
“Even with the potential for upward revisions, today’s report underscores weaker hiring since the start of the year,” House said.
However, Odeta Kushi, deputy chief economist with First American Financial Corp., Santa Ana, Calif., said wage growth and healthy job growth is poised to boost the U.S. consumer. “Seventy percent of U.S. economic growth is driven by consumer spending,” she said. “The outlook for consumer economic strength remains strong, given that jobs are plentiful and wages are rising.”
Kushi noted while recent yield curve inversion stokes the flame of recession talk, “measures of the real economy, such as jobs and wage growth, remain strong. Indeed, it is household income that drives consumer spending and house buying, so it appears the U.S. consumer remains healthy and poised to spur more growth.”
