Labor Review: Context for the August Labor Report
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).
July Jobs Report Data |
Previous July Data |
Revised July Data |
August Forecast |
August Data |
Establishment Survey |
|
|
|
|
Nonfarm Payrolls Change |
255,000 |
275,000 |
175,000 |
151,000 |
Private Payrolls Change |
217,000 |
225,000 |
179,000 |
126,000 |
Average hourly earnings (% chg.) |
0.3% |
0.3% |
0.1% |
0.1% |
Household Survey |
|
|
|
|
Unemployment Rate (U-3) |
4.9% |
4.9% |
4.8% |
4.9% |
“True” Unemployment Rate (U-6) |
9.7% |
9.7% |
- |
9.7% |
Labor Force Participation Rate (%) |
62.8% |
62.8% |
- |
62.8% |
16-64 years old |
72.8% |
72.8% |
- |
73.0% |
25-54 years old |
81.2% |
81.2% |
- |
81.3% |
Employment to Population Ratio (%) |
59.7% |
59.7% |
- |
59.7% |
Labor Force Change |
407,000 |
407,000 |
- |
176,000 |
Population Growth (16+ years old) |
223,000 |
223,000 |
- |
234,000 |
LABOR TRENDS FOR WORKERS, JOB SEEKERS AND FAMILIES
Specifically, labor force participation is down among Americans under 60 years old
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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.