Economy Slows: 156k New Jobs in August; Unemployment Rate Back Up to 4.4%; Earnings Dip

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate ROSE in August to 4.4 percent;
  • Number of jobs ROSE 156,000 in August, below year-to-date average;
  • Average weekly earnings FELL $2.10, still a 2.8 percent year-year GAIN;
  • Average workweek SLIPPED to 34.4 hours;
  • Prior month job totals REVISED DOWN: June from a gain to 231,000 jobs to a gain of 210,000; July from 209,000 to 189,000 [Without downward revisions, August job gain would have been lower.];
  • Private sector payrolls ROSE 165,000 in July; Government payrolls FELL 9,000;
  • Unemployment in August ROSE to 7,132,000 – first time above 7 million since April;
  • Average hourly earnings ROSE 3¢ in August, a 2.5 percent year-year gain;
  • The number of persons working full-time workers DECLINED 5166,000 in August; number of part-time workers INCREASED 34,000;
  • Number of manufacturing jobs INCREASED 36,000, largest month-month gain since August 2013;
  • Number of construction jobs INCREASED 28,000, largest increase since February;

Image result for employment situation

It may seem like piling on, but adding to the other woes of the Trump Administration, the labor market turned decidedly sour in August, as the unemployment rate rose and the number of new payroll jobs, while up, rose by just 156,000 the Bureau of Labor Statistics  reported Friday.

The weak report had the potential to play havoc with Wall Street as seasoned traders looked to an early getaway for Labor Day weekend, leaving trading responsibilities to less experienced personnel. It might also force the Federal Reserve to rethink its plans to gradually hike interest rates.

The August report appeared to put the brakes on what had been a successful start for the still fledgling Trump presidency as job growth in August fell below the 172,000 average monthly gain for the Administration’s first six months.

There were some bright spots in the otherwise disappointing report with growth in the number of manufacturing and construction jobs but a perennial “winner” – education and health services added just 25,000 new jobs compared with an average monthly gain of 43,000 since President Trump took office. The health component added 16,600 jobs in August down from an average monthly increase of almost 38,000.

With the end of the summer, the number of leisure and hospitality jobs increased just 16,000 in August with only 9,200 food service jobs – a typical employment mainstay of college students on summer break. There were fewer than 1,000 new retail jobs added in August, extending a prolonged slump for that sector. The 800 new jobs did however did however mark the first gain in the retail sector since January.

Perhaps most devastating to the overall economy was the decline in average weekly earnings. The drop came even though the two lowest paying occupation categories – retail and leisure and hospitality – showed very weak August job growth. The drop in earnings could mean weaker retail sales which are about 55 percent of personal consumption spending which in turn is about 2/3 of the gross domestic product.

The BLS report did not include any impact for Hurricane Harvey which devastated Texas. The BLS job surveys were completed before the storm made landfall and, the BLS said, “data collection…was largely completed prior to the storm.”

The report though did underscore the still relatively weak recovery from the decade old recession. Job growth from onset of the recession is about 6 percent. At the same point since the onset of the previous four recessions (about 116 months) the average increase in the number of jobs in the previous three recessions (1981-82, 1900-91 and 2001) was 12 percent.

According to the August report, the number of persons not in the labor force grew 128,000; in the preceding six months, the average increase in the number of persons not in the labor force was 49,000. The labor force in August increased by just 77,000; in June and July the labor force increased by a combined 710,000. While the labor force participation rate remained at 62.9 percent in August, the employment-population (“e-pop”) ratio slipped from 60.2 percent to 60.1 percent. E-pop measures employment as a percent of the over-16 population without adjusting for those in school or otherwise not available or looking for work.

The report reflected recent increases in first-time claims for unemployment insurance as the number of individuals unemployed for five weeks or less increased 89,000. In the previous six months, the number of persons unemployed for five weeks or less fell an average of 56,000 per month.

The teen-age unemployment rate which had been trending down in recent months jumped up in August to 13.6 percent from 13.2 percent in July. That said, the unemployment rate for those without a high school diploma fell to 6.0 percent in August from 6.9 percent in July while the unemployment rate for high school graduates (but no college) increased to 5.1 percent in August from 4.5 percent in July.

As another sign of a tightening labor market, the number of temp jobs increased in August by just 100.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

 

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