Friday, September 01, 2017

Comment: A Disappointing Employment Report

by Bill McBride on 9/01/2017 12:31:00 PM

The headline jobs number was below expectations, and there were downward revisions to the previous two months.  And the unemployment increased slightly.   Overall a disappointing report.

Earlier: August Employment Report: 156,000 Jobs, 4.4% Unemployment Rate

In August, the year-over-year change was 2.097 million jobs. This is still decent year-over-year job growth, but this is the lowest year-over-year growth since early 2013.

Note that August has been the second weakest month for job growth over the previous three years; only January has been weaker.  This is the 3rd consecutive August report below 200 thousand jobs:  157 thousand in August 2015, 176 thousand in August 2016, and now 156 thousand in August 2017.   This recent history was a key reason I took the under versus the consensus view.

On the impact of Hurricane Harvey from the BLS:

Hurricane Harvey had no discernable effect on the employment and unemployment data for August. Household survey data collection was completed before the storm. Establishment survey data collection for this news release was largely completed prior to the storm, and collection rates were within normal ranges nationally and for the affected areas.
So the impact from the hurricane on employment will be in the September, and probably October, reports.

Average Hourly Earnings

Wages CES, Nominal and RealClick on graph for larger image.

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.5% YoY in August.

Wage growth has generally been trending up.

Part Time for Economic Reasons

Part Time WorkersFrom the BLS report:
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was essentially unchanged at 5.3 million in August and has shown little movement in recent months. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.
The number of persons working part time for economic reasons decreased slightly in August. The number working part time for economic reasons suggests a little slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 8.6% in August.

Unemployed over 26 Weeks

Unemployed Over 26 WeeksThis graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.74 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.79 million in July.

This is generally trending down, but still a little elevated.

Overall this was a disappointing report.