By Thomas Cooley and Peter Rupert
The BLS announced payroll employment increased 201,000 in August with no real surprises…except 50,000 in downward revisions (-40 for June and -10 for July) that temper the strong report. Total private employment rose 204,000 while the government sector sank by 3,000. The service sector added 178,000 jobs, with 40,700 coming from health care and social assistance.
Average weekly hours remained at 34.5 while average hourly earnings increased from $27.06 in July to $27.16 in August and have increased 2.9% year-over-year. However, the CPI increased nearly 2.9% as well leading to almost no gain in real average hourly earnings over the year. The more comprehensive employment cost index also showed steady growth.
The household survey reveals almost no change in the unemployment rate: from 3.87% in July to 3.85% in August. However, the number employed fell by -423,000, the number unemployed fell by -46,000, leading to a decline in the labor force of -469,000. With population increasing 223,000 means the labor force participation rate fell from 62.9 to 62.7 and the employment to population ratio fell from 60.5 to 60.3.
The labor market remains very tight in the sense that there are now more vacancies than unemployed persons in two regions, the midwest and the south, and about the same number of vacancies as unemployed in the northeast and west.
The Big Picture
While the 201,000 increase was in line with many predictions, the 50,000 downward revision should temper optimism. The decline in participation and the employment to population ratio also added a slight negative spin. It is still a robust labor market with many job openings available. Importantly, there is nothing in this report that would temper the Fed’s signaled intention to raise interest rates at the next meeting.
