Friday, September 07, 2018

Comments on August Employment Report

by Bill McBride on 9/07/2018 09:43:00 AM

The headline jobs number at 201,000 for August was slightly above consensus expectations of 195 thousand, however the previously two months were revised down by a combined 50 thousand. Overall this was a solid report.

Earlier: August Employment Report: 201,000 Jobs Added, 3.9% Unemployment Rate

In August, the year-over-year employment change was 2.330 million jobs. This is solid year-over-year growth.

Average Hourly Earnings

Wage growth was above expectations in August. From the BLS:

"In August, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents to $27.16. Over the year, average hourly earnings have increased by 77 cents, or 2.9 percent."
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 2.9% YoY in August.

Wage growth has generally been trending up.

Prime (25 to 54 Years Old) Participation

Employment Population Ratio, 25 to 54Since the overall participation rate has declined due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate decreased in August to 82.0%, and the 25 to 54 employment population ratio decreased to 79.3%.

The participation rate had been trending down for this group since the late '90s, however, with more younger workers (and fewer 50+ age workers), the prime participation rate might move up some more.  The employment population ratio is almost back to the pre-great recession highs.

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), at 4.4 million, changed little over the month but was down by 830,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs."
The number of persons working part time for economic reasons has been generally trending down, and the number decreased in August to the lowest level since October 2007. The number working part time for economic reasons suggests there is still a little slack in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that decreased to 7.4% in August. This is the lowest level for U-6 since April 2001.

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 1.435 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 1.478 million in June.

Summary:

The headline jobs number was slightly above expectations, however the previous two months were revised down.

The headline unemployment rate was unchanged at 3.9%,  and U-6 decreased to 7.4% - the lowest rate since 2001.  And wage growth was above expectations.

Overall, this was a solid report.   For the first eight months of 2018, job growth has been solid, averaging 207 thousand per month.