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 out this morning. Indeed, total nonfarm employment in America rose by 130K payrolls in August, the 107th consecutive month of net job growth but below expectations and perhaps inflated a bit by a temporary spike in hiring related to the upcoming government census. There was also a net downward revision of 20K payrolls to the June and July reports, which resulted in a less-volatile 3-month average job gain of 156K. That is the best reading since March and comfortably above what is needed to keep up with U.S. population increases.
Employment growth has clearly slowed over the past year, which is consistent with the gradual decline in job creation we suggested should occur following 2018’s above-trend pace of hiring. Put simply, monthly gains of 250K or more payrolls should become increasingly rare or else there is still a lot of slack left in the job market. Labor force participation improved in August to match the best level since 2013 as the favorable conditions continued to attract people back into the labor market, and the rate of unemployment held steady near a cycle low because the increase in job seekers (reentrants) roughly offset the solid payrolls gain. Moreover, the rise in participation over the past few years has increased the labor supply and in turn helped explain why wage growth has been muted and the decline in joblessness has slowed despite steady hiring. Average hourly earnings, though, exceeded forecasts in August and income gains remained especially strong among production (non-managerial) workers and in typically low-wage industries. This bodes well for consumer spending, the largest component of U.S. GDP, since consumption behavior for lower-income Americans is more sensitive to changes in earnings.
Sources: Econoday, U.S. DoL, Bloomberg, Twitter, FRBSL