August 2019 Employment Report

Click image for larger view

The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm payroll employment rising by 130,000 jobs in August (+158,000 expected). Also, combined June and July employment gains were revised down by 20,000 (June: -15,000; July: -5,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) was unchanged at 3.7% as expansion of the working-age labor force (+571,000) roughly matched growth in the number of employed persons (+590,000). 

Click image for larger view

Observations from the employment reports include:

* The establishment (+130,000 jobs) and household survey results (+590,000 employed) were dramatically different. The seasonal adjustment to the establishment number was the biggest identifiable factor contributing to the disparity with the household result: Had average (since 2009) August CES (business birth/death model) and seasonal adjustments been used, job gains might have been bumped to +214,000.

* Manufacturing added 3,000 jobs in August. That result seems to run counter to the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which contracted in August. Wood Products employment was unchanged (ISM increased); Paper and Paper Products: -100 (ISM increased); Construction: +14,000 (ISM increased). 

Click image for larger view

* The number of employment-age persons not in the labor force (NILF) fell (-364,000) to 95.5 million. This metric seems to have leveled off since the latter half of 2018. Meanwhile, the employment-population ratio (EPR) inched up to 60.9% -- its highest level since December 2008; roughly, then, for every five people being added to the working-age population, three are employed. 

Click image for larger view

* With absolute growth in the labor force nearly 2.8 times that of the civilian population, the labor force participation rate rose to 63.2% -- matching the Jan/Feb 2019 peak. Average hourly earnings of all private employees increased by $0.11, to $28.11, resulting in a 3.2% year-over-year increase. For all production and nonsupervisory employees (pictured above), hourly wages also rose by $0.11, to $23.59 (+3.5% YoY). Because the average workweek for all employees on private nonfarm payrolls expanded by 0.1 hour (to 34.4 hours), average weekly earnings increased by $6.58, to $966.98 (+3.0% YoY). With the consumer price index running at an annual rate of 1.8% in July, workers are maintaining purchasing power according to official metrics. 

Click image for larger view

* Full-time jobs jumped by 360,000, to a new record. Those employed part time for economic reasons (PTER) -- e.g., slack work or business conditions, or could find only part-time work -- also bounced by 397,000. Those working part time for non-economic reasons rose by 260,000 while multiple-job holders edged lower by 16,000. 

Click image for larger view

For a “sanity test” 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 dropped by $17.4 billion, to $193.5 billion (-8.3% MoM, but +1.2% YoY and +3.4% YTD). To reduce some of the monthly 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 5.0% 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.