August jobs report shows weakness

Steve Benen has the monthly jobs report for August. Job numbers fall short of expectations in August:

The Bureau of Labor Statistics reported this morning that the U.S. economy added 156,000 jobs in August, which is down from June and July totals, and fell short of expectations. The unemployment rate, while still low, inched up a little to 4.4%.

AugustJobs

In fact, overall, this is not a heartening set of data. The revisions for June and July were both lower, and combined they show a net loss of about 41,000 jobs. (In case you’re curious, the BLS report explained at the outset, “Hurricane Harvey had no discernible effect on the employment and unemployment data for August.”)

All told, if current averages keep up, we’re on track to see the U.S. economy add about 2.1 million jobs this calendar year, which isn’t bad, but which would fall short of last year’s totals. In the first eight months of last year, 1.55 million jobs were created, while in the first eight months of this year, the total is 1.4 million.

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

AugustPrivate

One of the numbers that jumps out is retail trade, which added only 800 jobs in August. This reflects the massive transformation of the retail sector underway from automation and computerization, especially e-commerce.

Here is something to consider from Axios.com. Expert doubles down: robots still threaten 47% of U.S. jobs:

A leading authority on robotization has doubled down on his most controversial forecast — that automation threatens 47% of American jobs. And he belittles critics who say technological upheaval seems scary but always generates sufficient new work.

Why it matters: In a new report by Citi, Carl Frey, a professor at Oxford University, also forecasts the demise of American retail work. If he is right, it is an outcome that will reach further than the decimation of manufacturing because it will involve a different, large set of cities.

Frey writes in the Citi report:

  • Retail work is likely to vanish in the coming decades, leading to a long, unknowable period of adjustment before retail workers find new employment.
  • “Groups that have lost out to automation since the computer revolution are still struggling to find new and better-paid jobs,” and retail workers will find it just as hard “to find solid footing in the labor market.”

More than anyone, Frey and artificial intelligence expert Michael Osborne ignited the current fear of a robot apocalypse with a joint 2013 paper that introduced their famous 47% forecast. Critics have attacked the core of their work. The most frequent pitch I receive is from PR agents offering yet another expert rejecting robot-induced mass unemployment. Their scorn has two main assertions:

  • The theory of “technological unemployment,” conceived by John Maynard Keynes in the 1930s, has been proven wrong. Keynes said tech was advancing so fast that the economy would fail to replace jobs that were destroyed. But, just as they have been through repeated technological disruptions since the start of the Industrial Age in the early 19th century, Keynes’ fears of mass joblessness were not borne out.
  • The robot age will turn out the same — normal economic churn will replace destroyed jobs with mostly unforeseeable new ones.

In the Citi report, Frey quotes his critics and rejects their arguments. He writes:

  • Keynes was not wrong about the destruction of jobs, which happened, but about the number of jobs that would arise to replace them.
  • This time, the scale on which jobs will be replaced — whether this technological upheaval will turn out the same as the past — is ultimately unknowable at this stage.
  • “What we do know is that the potential scope of automation has expanded rapidly and that many of today’s jobs will change or disappear.”
  • And the robust spread of automation suggests that “historical rates of productivity growth are likely to be a poor guide to the future.”

Other highlights:

  • Despite appearances, brick-and-mortar still accounts for the overwhelming percentage of sales — 92%, according to Citi. But e-commerce is up from a 2% share a decade ago, and the number is rising by 20% a year.
    • The cost of automation is falling, making retailers more willing to use it to lay off more costly workers.
    • 80% of the jobs in transportation, warehousing and logistics are vulnerable to automation.
    • 63% of sales jobs are vulnerable.
    • The average number of robots in fulfillment centers like Amazon warehouses was 461 in 2013. But now it is 3,200.
    • “The disruption is very much at its infancy,” Martin Wilkie, the lead author of the report, tells Axios. He said that, in the coming decades, “the premise is that stores are bypassed in their entirety.”

E-commerce’s reach is patchy across the globe:

  • In big U.S. and European cities, it’s possible to order and receive a product in one or two hours.
  • In Brazil, the average promised delivery time is 9 days.
  • South Koreans do 10% of their grocery purchases on-line, along with 7.2% in Japan and 5.3% in France.
  • The U.S. is among the lowest, with only 1.4%.

This may soon change with e-commerce giant Amazon’s purchase of Whole Foods, which has already caused panic among major grocers. Amazon Cuts Whole Foods Prices as Much as 43% on First Day:

Amazon.com Inc. spent its first day as the owner of a brick-and-mortar grocery chain cutting prices at Whole Foods Market as much as 43 percent.

In a sign of how the retailer is changing, the Amazon Echo, a voice-activated electronic assistant, was also for sale, for $99.99 — a sharp pivot into electronics for a company known for kale and quinoa. The Echo Dot, a smaller version, was advertised for $44.99.

The tech giant’s $13.7 billion purchase of Whole Foods has sent shock waves through the already changing $800 billion supermarket industry.

The wedding between Amazon and the upscale grocery promises to upend the way customers shop for groceries. Cutting prices at the chain with such an entrenched reputation for high cost that its nickname is Whole Paycheck is a sign that Amazon is serious about taking on competitors such as Wal-Mart Stores Inc., Kroger Co. and Costco Wholesale Corp.

“Price was the largest barrier to Whole Foods’ customers,” said Mark Baum, a senior vice president at the Food Marketing Institute, an industry group. “Amazon has demonstrated that it is willing to invest to dominate the categories that it decides to compete in. Food retailers of all sizes need to look really hard at their pricing strategies, and maybe find some funding sources to build a war chest.”

Rivals Adjust

Some rivals have already reacted to the kickoff of what could become a new era of selling food in the U.S.

Wal-Mart, the world’s biggest retailer, has already invested billions into lowering prices across the board over the past year or so, and has revamped the produce section at its U.S stores, improving sight lines, adding more fresh-cut fruits and even creating a sweeter bespoke cantaloupe. That, along with an aggressive rollout of curbside grocery order pickup, helped the company record its best food sales growth in five years in its most recent quarter.

Costco, meanwhile, has a full slate of organic items that are priced about 30 percent cheaper than the same products at Whole Foods, according to Sanford Bernstein. It’s able to price lower thanks to a business model that charges membership fees, focuses on selling a limited assortment of bulk-sized goods and features a treasure-hunt experience in the stores.

Maarten van Tartwijk, a spokesman for Ahold Delhaize, the Dutch retailer that owns the Stop & Shop chain in the U.S., said the company has invested heavily in its online operation. And Germany-based retailers Aldi Stores Ltd. and Lidl, touting lower prices, continue to expand in the U.S.

* * *

After falling 37 percent this year on disappointing sales and investor concern over the Amazon-Whole Foods union, Kroger stayed essentially unchanged on Monday in New York.

Sprouts Farmers Market Inc., an upscale grocer that competes with Whole Foods and is cited by analysts as a possible consolidation target, decreased about 10 percent. Shares of Wal-Mart fell 0.8 percent and Target Corp. was down about 1 percent. Costco increased less than 1 percent. Amazon shares rose 0.08 percent.

“Goodbye, Whole Foods as we know it,” Karen Short, an analyst at Barclays Capital Inc. in New York, said in a note. “The conventional supermarket has not evolved much in decades. But Amazon will likely drive drastically different shopping behavior in grocery. The survival of the fittest has begun.”

The “mom & pop” corner grocer that many of you may have been familiar with? Yeah, they may soon  be history, like the horse and buggy.

11 Responses to August jobs report shows weakness

  1. What Trump and His Team Have Wrecked So Far

    Here’s a round up from our “While He Was Tweeting” series.
    AUGUST 31, 2017

    http://billmoyers.com/story/what-trump-wrecked-so-far/

  2. as I said in earlier post I see help wanted signs everywhere I go mostly minimum wage jobs. there maybe many high paying job openings but I don’t know that area.

  3. John Huppenthal

    Your narrative doesn’t fit the facts. There are an all time record number of job openings and 3% gdp growth.

  4. For Sure Not Tom

    “In the first eight months of last year, 1.55 million jobs were created, while in the first eight months of this year, the total is 1.4 million.”

    Shhhhhhh! You’re scaring the Trumpaloompas.

    • “Shhhhhhh! You’re scaring the Trumpaloompas.”

      Why would that bother Trump supporters? Last month AzBM convinced me that the economy is still running on gas from the Obama era. Trump doesn’t have anything to do with this…

      • It’s unlikely that Trump does have much to do with this, though scandal and uncertainty in policy-making may put some headwinds on economic expansion.

        With that said, it looks like we have continued expansion at a sustainable, if tepid, rate. That’s not bad, but it’s nothing to be overly excited about either.

        (And now, back to the job searching…)

        • Well, AzBM did a good job explaining why it is still a holdover effect from Obama, and he converted me.

          Good luck on your job searching!!! That is a most stressful process and I wish you only the best!

          • Thank you. Working on job applications – will likely be moving sooner rather than later since there’s not really many jobs in my field in Tucson outside of the big military contractors, and I’d rather not work for one of them if possible.

        • John Huppenthal

          The job openings record of 6.1 million as compared to job creation suggests that people are really ensconced in retirement, college and high school or trapped on welfare and locked out by minimum wage.

          It is going to take even more suction force to pull them out. Even if Trump pulls out a modest tax reform reducing the corporate rate a little bit, that will be enough to produce expectations that he will continue to fight for more tax rate reduction every year for the next 7 years.

          That expectation alone may drive the economy to 4% growth next year, setting the stage for even greater tax reform.

          Despite every appearance that it is overinflated, the stock market refuses to waver. The Wilshire Total Market Index, at 26 trillion dollars, is at an all-time record. By comparison, all of the EU with 160 million more people, is at 7 trillion.

          The stock market is the best indicator for the future economy. As you have observed, that doesn’t mean 4% growth in jobs, just 4% growth in economic production and corporate profits. However, it is very likely to exceed Obama’s job growth by a chunk. We shall see how big of a chunk.

          The 6.1 million all time record job openings however do suggest that automation is just not a problem on employment.

          When you look at the Beveridge curve for the last year, you can see that job openings are not as efficient at producing jobs at they were after the Reagan tax cuts. The Reagan curve curled down and to the left producing lower rates of unemployment at fewer job openings. The Obama curve curled up and to the left, producing higher rates of unemployment at more job openings.

          You all are in the business of denying economics and the truth behind such observations. However, time will tell. If growth is 4% next year and job growth exceeds 3%, say hello to President Ivanka Trump, 2025 to 2032.

          • For Sure Not Tom

            Cerezas deliciosas.

          • The alternate story is that lax antitrust regulation and a bevy of M&A activity since the 1980’s, and especially over the past 15 years, has reduced market power and concentration, lowered competition, raised prices, and depressed wages and economic growth – recent empirical work has shown a distinct increase in markups since 1980, which shows that something is happening, if not identifying the reason. One could certainly see increasing divergence between economic growth and corporate profit growth, with the latter continuing to outpace the former.

            Another key facet is that with interest rates continuing to remain near historic lows, continual influxes of capital from China and elsewhere, the rise of mutual funds and passive investing among the mainstream, and a lot of share buyback activity, there are considerably fewer shares available of all total companies relative to the amount of money that people want to invest in the stock market, and as such, there’s reason to believe that traditional metrics of P/E ratios and so forth are not indicative of the same levels of corporate profit growth than they were a few decades ago.

            But of course, time will tell, as it always does.