Friday, September 06, 2019

Comments on August Employment Report

by Calculated Risk on 9/06/2019 09:14:00 AM

The headline jobs number at 105 thousand for August ex-Census (130K total including temp Census hires) was well below consensus expectations of 158 thousand, and the previous two months were revised down 20 thousand, combined. The unemployment rate was unchanged at 3.7%. There was good news with the increase in the participation rate and employment-population ratio. But overall this was a disappointing employment report. Note: See: How to Report the Monthly Employment Number excluding Temporary Census Hiring

Earlier: August Employment Report: 105,000 Jobs Added Ex-Census, 3.7% Unemployment Rate

In August, the year-over-year employment change was 2.074 million jobs including Census hires (note: this will be revised down significantly in February with the benchmark revision).

Average Hourly Earnings

Wage growth was at expectations. From the BLS:

"In August, average hourly earnings for all employees on private nonfarm payrolls rose by 11 cents to $28.11, following 9-cent gains in both June and July. Over the past 12 months, average hourly earnings have increased by 3.2 percent."
Wages CES, Nominal and RealThis 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 3.2% YoY in August.

Wage growth had been generally trending up, but has weakened recently.

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 increased in August to 82.6% from 82.0% in July, and the 25 to 54 employment population ratio was increased to 80.0% from 79.5%.

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) increased by 397,000 to 4.4 million in August; this increase follows a decline of similar magnitude in July. 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 increased in August to 4.381 million from 3.984 million in July.   The number of persons working part time for economic reason has been generally trending down.

These workers are included in the alternate measure of labor underutilization (U-6) that increased to 7.2% 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 1.243 million workers who have been unemployed for more than 26 weeks and still want a job. This was up from 1.166 million in July.

Summary:

The headline jobs number was well below expectations, and the previous two months were revised down.  The headline unemployment rate was unchanged at 3.7%. Wage growth was at expectations.

Some good news is the participation rate and employment-population rate increased.

Overall this was a disappointing jobs report.   The economy added 1.239 million jobs through August 2019 ex-Census, down from 1.871 million jobs during the same period of 2018 (although 2018 will be revised down with benchmark revision to be released in February 2020).   So job growth has slowed.