August 2015 Employment Report

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According to the Bureau of Labor Statistics’ (BLS) establishment survey, non-farm payroll employment increased by 173,000 jobs in August -- well below expectations of 223,000. However, combined June and July employment gains were boosted by 44,000 (June: +14,000; July: +30,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) dropped to 5.1% thanks to a combination of workers finding jobs (196,000) and people leaving the labor force (261,000). 

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Observations from the employment report include:

* The disparity in jobs gains between the establishment (+173,000) and household (+196,000) surveys was fairly modest.

* “Manufacturing employment decreased by 17,000 in August, after changing little in July (+12,000),” the BLS reported. “Job losses occurred in a number of component industries, including fabricated metal products and food manufacturing (-7,000 each). These losses more than offset gains in motor vehicles and parts (+6,000) and in miscellaneous durable goods manufacturing (+4,000). Thus far this year, overall employment in manufacturing has shown little net change.”

* Employment in mining fell in August (-9,000), with losses concentrated in support activities for mining (-7,000). Since reaching a peak in December 2014, mining employment has declined by 90,000. Construction gained 3,000 jobs in August (+113,000 YTD 2015).

* Over 99% (139,200) of private-sector (140,000) job growth occurred in the sectors typically associated with the lowest-paid jobs -- Retail Trade: +11,200; Professional & Business Services: +33,000; Education & Health Services: +62,000; and Leisure & Hospitality: +33,000. This is a persistent issue, as we have repeatedly highlighted: There are 1.42 million fewer manufacturing jobs today than at the start of the Great Recession in December 2007. Nearly 1.45 million Food Services & Drinking Places (i.e., wait staff and bartender) jobs have been added during that time period, however. 

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* The employment-population ratio ticked up to 59.4% -- at the top of the range it has occupied during much of the past year; i.e., for every five people added to the population, only three are employed. Meanwhile, the number of employment-age persons not in the labor force rose by 261,000 to a new record over 94.0 million. 

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* The labor force participation rate (LFPR) remained stable at 62.6%; prior to June the LFPR had not been that low since October 1977’s 62.4%. Average hourly earnings of all private employees rose by $0.08 (to $25.09), resulting in a 2.2% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages rose $0.05 (+1.9% YoY). With the CPI running at an official rate of 0.2% YoY, wages are technically rising in real (inflation-adjusted) terms. The average workweek for all employees on private nonfarm payrolls edged up to 34.6 hours in August. 

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* Finally, full-time jobs jumped by 435,000 while part-time jobs fell by 349,000. Full-time jobs have been trending higher since December 2009, and are 149,000 higher than the pre-recession high (even while the non-institutional, working-age civilian population has risen by an estimated 17.9 million). Part-time jobs, by contrast, have been stuck in a channel between roughly 27 and 28 million.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.