There was a lot of important information on the U.S. economy released this week but the biggest data point is without a doubt the latest monthly job report from the Bureau of Labor Statistics (BLS) out this morning. Indeed, total nonfarm employment in America rose by 151K payrolls in August, below the +175K consensus estimate but not too terrible considering the above trend growth seen in the previous two months. Moreover, the June and July payrolls gains were revised to +271K and +275K, respectively, which together with the August print helped lift the 3-month average (less-volatile) payrolls increase to +232K, the highest reading since January and well above many Federal Reserve officials’ estimates for the pace of job creation in America needed to keep up with population growth.
This average, though, is historically high and should drift lower over time as the economy nears full employment. Further, much of the job growth in August occurred in low-paying sectors and among less-educated Americans (high school diploma or less), implying that teens getting end-of-summer jobs were likely a big driver of job creation last month. Regardless, August’s headline gain was the 71st consecutive month of net job creation in this country, the longest such string in U.S. history. As for joblessness in August, the official unemployment rate (U-3) held steady at 4.9 percent and the underemployment rate (U-6) was also unchanged last month (9.7 percent). However, this meant that roughly 6 million Americans who wanted full-time jobs in August were still stuck with part-time work. Slightly fewer unemployed workers, though, gave up their job searches last month but the rate at which they found jobs did not rise.
Other highlights from the report include that full-time employment as a share of total employment rose to the best level of the recovery last month, due largely to a drop in part-time employment, and the share of U.S. workers employed in services sectors hit a record-high of 86.4 percent in August as the country’s long-term shift away from manufacturing jobs continued. There were also some clear negatives in the report, such as weaker-than-expected wage growth and a decline in the average workweek, along with signs of a slower pace of reduction in labor market slack. Such areas clearly need improvement going forward but overall this was a solid report, especially for the stock market because there was enough of a mix of both positives and negatives to avoid putting any additional pressure on Federal Reserve officials to raise interest rates. In fact, the market-implied probability of a hike at next month’s Federal Open Market Committee (FOMC) meeting fell from 36 percent to 22 percent immediately after the release of the August job report.
Sources: Econoday, Twitter, Bloomberg, ZH, U.S. DoL, FRBSLPost author: Charles Couch