Friday’s August employment report from the Bureau of Labor Statistics (BLS) saw a 151,000 gain in nonfarm payroll jobs.  Private payrolls gained 126,000 jobs.  In the household survey, the unemployment rate remained unchanged at 4.9%. The number of employed was up 97,000 from July, and the number of individuals entering the labor force was 176,000.  The labor force participation rate remained unchanged at 62.8%.  In the establishment survey, nonfarm payroll job growth for June was revised down from +292,000 to +271,000 (final estimate).  For July, it was revised up from +255,000 to +275,000 (second estimate).

 

 

 

LABOR TRENDS FOR WORKERS, JOB SEEKERS AND FAMILIES

The labor force participation rate remains subdued, even among prime-age workers The labor force participation rate remained unchanged at 62.8% for the month of August. It remains significantly below the peak of the previous business cycle (December 2007) of 66.0% (a difference of 3.2 percentage points). The rate for 25-54 year olds is 81.3%. It is down 1.8 percentage points compared to the peak of the last business cycle, when it was at 83.1%.

Specifically, labor force participation is down among Americans under 60 years old When broken down into five-year age cohorts, only workers age 60 and older have seen their participation increase since the start of the recovery. By comparison, workers age 59 and younger, particularly ages 16 to 19 and men ages 20 to 24, have seen their workforce participation decline significantly over the course of the recovery.

Full-time employment remains subdued as a share of total employed The share of the employed that are working full-time is still more than a percentage point below pre-recession levels, even though the number of full-time jobs finally passed its pre-recession peak in August 2015. Part-time jobs jumped during the recession and remain elevated by nearly 3 million compared to pre-recession levels. As a share of the employed, part-time work is up 1.3 percentage points compared to its pre-recession level.

Average monthly job growth in 2016 remains below its 2013, 2014, and 2015 numbers Thus far in 2016, the average monthly private-sector job growth rate in 2016 is the lowest since 2010. It would take nearly 5.5 million more private-sector payroll jobs added in the remainder of 2016 to close the growth gap in private-sector jobs between this recovery and the average post-1960 recovery, or nearly 1.4 million new jobs per month. Over the past 12 months, nearly 2.6 million nonfarm payroll jobs were added.

Long-term unemployment remains elevated It takes a median 78 days for the jobless worker to find a job or leave the workforce. The average is worse—193 days. As a percent of the jobless, the share of long-term unemployed (27 weeks or more) remains elevated at 26.1% compared to its 40-year, pre-recession average of 14%.

THE BIGGER PICTURE

The Wall Street Journal’s survey of economists finds the number of new jobs needed to keep the unemployment rate unchanged is 145,000 per month.  Currently, the three-month moving average for the establishment payroll survey is 232,000.  This is a welcome improvement compared to the preceding months’ moving averages of 190,000 (July) and 146,000 (June).

• If the labor force participation rate that existed just before the previous recession (66.0%, December 2007) is applied to the August 2016 civilian non-institutional population (253,854,000), it implies there should be 167,389,200 Americans in the labor force.  As of August 2016, the actual number is only 158,463,000.  This suggests that approximately 8.1 million Americans are still on the sidelines.
• In addition, the first estimate of Q2 real GDP growth 1.2% was revised to a lower 1.1% after the second estimate became available.  Economists forecasted 2.4% growth.  This low growth trend does not bode well for employment, which tends to be a lagging indicator.
• The Wall Street Journal notes that the lackluster jobs report leads markets to believe the Fed will not increase interest rates when it meets in September.

UNDERLYING DETAILS

The overall situation remains very disappointing.  The jobs numbers for June and July seemed promising; however, August was a return to mediocrity.

• The number of unemployed persons increased from 7.770 million to 7.849 million.  Since August of last year, it has fallen from 8.018 million.  This August, the number of persons unemployed less than 5 weeks increased by 130,000.  There was a modest decrease in the number of long-term unemployed (those without jobs for 27 weeks or more) from 2.020 million in July 2016 to 2.006 million this August.  Long-term unemployment as a share of total unemployment fell from 26.6% in July 2016 to 26.1%.
• BLS reports monthly payroll job gains occurred in food services and drinking places (+34,000), social assistance (+22,000), professional and technical services (+20,000), financial activities (+15,000), and health care employment (+14,000).  Employment in mining continued its downward trend (-4,000).  The latter has shed about 223,000 jobs since peaking in September 2014.
• In July, there were 576,000 discouraged workers (persons not looking for jobs because they perceive none are available for them).  This is about the same from a year earlier.
• ADP’s National Employment Report estimates that private-sector employment increased 177,000 in August, with 183,000 jobs created in the service sector, while 6,000 jobs were lost by the goods-producing sector.  Professional and business jobs were up by 53,000 jobs.  Trade, transportation, and utilities created 26,000 jobs.  The financial sector added 15,000 jobs.  Manufacturing netted 0 jobs, and construction jobs decreased by 2,000. ADP’s employment numbers, though useful, are not necessarily a reliable predictor for actual payroll jobs numbers released by the BLS.

The next BLS employment situation report for initial September employment numbers and revisions for July and August data are scheduled for release on Friday, October 7, 2016, at 8:30 a.m. ET.