On September 6, the Bureau of Labor Statistics released its employment report for August. According to the Establishment Survey, the US economy added 142 thousand jobs in August. In addition, the previous two months were revised down, -61 in June and -25 in July. The Household Survey put the gain at 168 thousand jobs.
From the Establishment Survey, the leisure and hospitality sector added 46 thousand jobs; construction 34 thousand jobs; and health care 30 thousand jobs. Sectors losing jobs were led by manufacturing (24 thousand) and retail trade (11 thousand).
Average weekly hours rose from 34.2 to 34.3 so that total hours of work increased by 4.7%. Average hourly earnings increased 0.4%, from $35.07 to $35.21.
The unemployment rate, derived from the Household Survey, fell marginally, from 4.25% to 4.22%. (The headline numbers are touting a decline from 4.3% to 4.2%.) However, a broader measure of the unemployment rate which includes marginally attached individuals rose between July and August, from 7.8% to 7.9%.
Policy Implications
Is strength or weakness in the eye of the beholder? Or rather, in the data of the beholder?
Given the signaling from members of the FOMC, it’s pretty clear that the committee will lower the Federal funds rate at its next meeting later in September. Speculation is growing that the committee may deliver a 50 basis point reduction rather that `just’ a 25 point reduction. The case for a more aggressive loosening of monetary policy lies on the real side of the economy. Where does this weak real side show up? Maybe in the employment numbers reported above. Yet, the same report shows a slight decline in the unemployment rate and a 48 thousand decline in the number unemployed. The labor force increased by 120 thousand. As mentioned above, wage growth was fairly strong and total hours increased substantially. Second quarter real GDP growth was revised up from 2.8% to 3.0%. Considering that US population growth is running around 0.5% per year, real per capita output growth for the second quarter is around 2.5% which is well above its long run average. Meanwhile, while PCE inflation has fallen, it is still a bit above the FOMC’s 2% target.
