August jobs report ‘not too hot, not too cold’

There has been some volatility in the job numbers in recent months, some of which is attributable to seasonal adjustments in employment this time of year. The media panicked over the May jobs report, but then June and July were strong reports. The August jobs report today is down somewhat from those numbers, but is still positive. This is why you always have to wait for the later revisions and look at the average job growth over time.

Steve Benen is back this month with the August jobs report. Job growth tapers off in August, but unemployment remains steady:

Following very strong job growth in June and July, economists predicted weaker results in August. As it turns out, that’s exactly what happened.

AugustJobs

The Bureau of Labor Statistics reported this morning that the U.S. economy added 151,000 jobs in August, roughly in line with projections. The unemployment rate remained the same at 4.9%, the 11th consecutive month the rate has been at 5% or lower.

As for the revisions: June’s job totals were revised down, from 292,000 to 271,000, while July’s were revised up, from 255,000 to 275,000. Combined, the totals effectively even out.

All told, this isn’t an especially exciting jobs report, though it does come against a notable backdrop: the Federal Reserve is weighing a possible rate hike, and after robust job growth in the early summer, an increase appeared more likely. Today’s mild BLS report may very well lead the Fed to hold off a bit longer.

Over the last 12 months, the overall economy has created 2.44 million new jobs, which is a pretty healthy number. What’s more, August was the 71st consecutive month of positive job growth, which is the longest on record.

Here’s another chart, this one showing monthly job losses/gains in just the private sector since the start of the Great Recession.

AugustPrivate

Jared Bernstein writes at his blog, Goldilocks rising: job market not too hot, not too cold:

The pace of employment gains slowed slightly in August, as payrolls were up 151,000 and the unemployment rate held steady at 4.9 percent.

Despite the fact that expectations were for 180,000 jobs, the lower number in today’s report should not at all be taken as a change in the solid, underlying trend in employment growth. First, note the JB smoother figure below, which averages out the bips and bops in the monthly data by showing monthly gains at 3, 6, and 12-month averages. Over the past three, payrolls are up 232,000 per month on net, and while the six-month average gets dinged by May’s outlier 24,000 count, the longer term average is right about 200,000.

Augsmoother
Source: BLS, my analysis

It is also the case, as I discuss below, that in recent years the first report of the August payroll number has later been revised up (perhaps due to seasonal adjustment issues).

But the broader picture suggests that, barring a negative shock, job gains of these magnitudes will continue nudging the US labor market towards full employment. However, while I put more weight on the smoothed values, the weaker-than-expected payroll number, along with a few other indicators in the report noted below, may give some of the more dovish Federal Reserve officials the evidence they need to hold off from a September rate hike, an outcome I would view as highly positive.

In fact, last night markets placed the probability of a September rate hike at 27 percent. This morning, post-jobs-report, it’s at 18 percent.

Other indicators which may dampen the “craze to raise:”

–The underemployment rate remains elevated at 9.7 percent, where it has been for four of the past five months. My analysis suggests that’s about a percentage point above the full-employment underemployment rate;

–Labor force participation remains low (the rate is stuck below 63 percent) and hasn’t moved much in recent months;

–The goods sector shed 24,000 jobs last month with small negatives in all major subcategories, including mining, construction, and manufacturing;

–Average weekly hours ticked down slightly;

–Year-over-year wage growth decelerated slightly from 2.7 percent in July to 2.4 percent in August.

–Health care employment, typically a stalwart, added only 14,000 jobs last month, well off its average pace of around 40,000.

I’m somewhat concerned about weaker job growth in the goods sector—the weakness in manufacturing and construction have persisted over the past year. And the underemployment/non-participation problem remains a clear signal that we’re not yet at full employment. But the downshift in payroll gains is no sign of a slowing in the underlying trend and, if anything, underscores (from the Fed’s perspective) the Goldilocks job market: not too hot, not too cold.

By the way, early in-person voting begins in Minnesota on Friday, September 23, in Michigan and South Dakota on Saturday, September 24, in Vermont on Sunday, September 25, Illinois on Thursday, September 29, and Wyoming on Friday, September 30. State Election Dates & Deadlines. Most other states with early voting begin in October. So the September jobs report released on the first Friday in October will be the last jobs report released before early voting is well underway. The U.S. economy is still adding jobs at a healthy rate.

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