August was the goldilocks of job reports. It wasn’t too hot. It wasn’t too cold. It was just right. Total nonfarm payroll employment increased by 315,000 in August, and the unemployment rate rose to 3.7%, according to the Bureau of Labor Statistics.
- Economists hit the nail on the head predicting 300,000 jobs in August.
Participation trophy. Getting a lot of attention, and rightfully so was the labor force participation rate which increased by 0.3 percentage points for the month to 62.4%. This explains why unemployment saw a little bump up despite the economy creating 300,000 new jobs. This is still down 1.0 percentage points from the February 2020 level.
- The number of persons not in the labor force who currently want a job declined by 361,000 to 5.5 million in August. This measure remains above its February 2020 level of 5.0 million.
Where the jobs are. Professional and business services saw the biggest jump in August with 68,000 followed by health care (+48,000), retail trade (+44,000), leisure and hospitality (+31,000), and manufacturing (+22,000).
- Unfortunately, construction, transportation and warehousing, information, other services, and government saw little changed in August.
Wages. Wages were up 0.3% for the month and are now up 5.2% year-over-year. Unfortunately, even if the CPI reports another zero growth month inflation is unlikely to/or below the wage growth rate which means wages are still failing to keep pace with inflation. This is very important because Conor Sen wrote in Bloomberg that because of rising rates and stable home prices “leaves rising incomes as the best hope for the housing market right now.”
Revision. The June report saw a big 105,000 downward revision to 293,000 which changes last month’s look at the labor market somewhat substantially. Because of that revision, men have now fully recovered their job losses from the pandemic while women are close, but not quite there yet (need about 300k more). Unfortunately, this is not population adjusted which means we have a ways to go before employment is back to pre-pandemic levels.
The consensus on the job’s report was about as good as it gets. While some still think the labor market is still running too hot, most believed this report takes a lot of pressure off the Fed’s next rate decision…
- MARK ZANDI: “Great jobs report for August! The Federal Reserve should take much solace in the numbers in its battle against high inflation…To be sure, the job market needs to bend more to rightly satisfy the Fed as policymakers struggle to quell wage and price pressures. At a minimum, monthly job gains need to be closer to 100,000. That would be in line with labor force growth and stable unemployment”
- JONATHAN FERRO: “If the Fed (and equity bulls for that matter) had to design a jobs report it would probably look a little something like this”
- JUSTIN WOLFERS: “All told, this is a very healthy labor market, which is now improving at a slower rate (as the Fed and others hoped)”