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According
to the
Bureau of Labor
Statistics’ (
BLS)
establishment survey, non-farm payroll employment added 156,000 jobs in August
-- well below
expectations
of +180,000. In addition, combined June and July employment gains were revised down
by 41,000 (June: -21,000; July: -20,000). Meanwhile, the unemployment rate (based
upon the
BLS’s
household survey) inched
up to 4.4% as the labor force expanded (+77,000) but the number of persons
employed contracted (-74,000).
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Observations
from the employment reports include:
*
The establishment (+156,000) and household (-74,000) surveys were poorly
matched in August.
*
We have often been critical of the BLS’s seeming to “plump” the headline
numbers with favorable adjustment factors; August may be such a case. Imputed
jobs from the CES (business birth/death
model) adjustment were roughly
average for the month of August (since 2000), but the BLS also applied a very
modest seasonal adjustment to the base data. Had average adjustments been used,
August’s job gains might have been closer to +117,000. Also, we become somewhat
concerned about the accuracy of the headline number whenever the birth/death and/or
seasonal adjustments are nearly the same magnitude as the initial value.
*
As for industry details, Manufacturing gained 36,000 jobs in August. That
result is consistent with to the Institute for Supply Management’s (ISM) manufacturing
employment sub-index, which expanded at a faster pace in August. Wood Products employment
rose by 100 jobs; Paper and Paper Products: +1,100. Construction employment advanced
by 28,000.
*
For once, less than 1% (1,300) of August’s private-sector job growth occurred
in the sectors typically associated with the lowest-paid jobs -- Retail Trade: +800;
Temporary Help Services: +100; Social Assistance: -3,600; and Leisure &
Hospitality: +4,000. This is a persistent issue despite August’s better results,
as we have repeatedly highlighted: There are 1.27 million fewer manufacturing jobs
today than at the start of the Great Recession in December 2007, but 2.09
million more Food Services & Drinking Places (i.e., wait staff and
bartender) jobs. In fact, Manufacturing has gained 137,000 jobs YTD2017 while
FS&D jobs have expanded by 212,500.
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*
The number of employment-age persons not in the labor force (NILF) advanced
by 128,000 -- to 94.8 million. August’s NILF estimate remains within 0.4% of
December 2016’s record high, however. Meanwhile, the employment-population
ratio (EPR) decreased fractionally to 60.1%; thus, for every five people being added
to the population, only three are employed.
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*
Given the number of people (re)entering the labor force, the labor force
participation rate (LFPR) remained constant at 62.9% -- comparable to levels
seen in the late-1970s. Average hourly earnings of all private employees increased
by $0.03, to $26.39, resulting in a 2.5% year-over-year increase. For all
production and nonsupervisory employees (pictured above), hourly wages rose by
$0.04, to $22.12 (+2.3% YoY). Since the average workweek for all employees on
private nonfarm payrolls shrank by 0.1 hour (to 34.4 hours),
average weekly earnings
decreased by $1.60, to $907.82 (+2.8% YoY). With the consumer price index
running at an annual rate of 1.7% in July, workers are -- officially, at least
-- holding steady in terms of purchasing power.
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* Full-time jobs retreated by 166,000; there are now 3.9
million more full-time jobs than the pre-recession high; for perspective, however,
the non-institutional, working-age civilian population has risen by nearly 22.2
million. Those employed part time for economic reasons (PTER) -- e.g., slack
work or business conditions, or could find only part-time work -- fell by 27,000.
Those holding multiple jobs dropped by 243,000.
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For a “sanity check” of the employment numbers, we
consult employment withholding taxes published by the
U.S. Treasury. Although “noisy”
and highly seasonal, the data show the amount withheld in August fell by $4.4
billion, to $190.4 billion (-2.3% MoM, and -1.3% YoY). To reduce some of the
volatility and determine broader trends, we average the most recent three
months of data and estimate a percentage change from the same months in the
previous year. The average of the three months ending August was 5.6% above the
year-earlier average -- well off the peak of +13.8% set back in September 2013.
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.
