August 2021 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm employers added 235,000 jobs in August (falling “disappointingly” short of the 720,000 expected). On a brighter note, June and July employment changes were revised up by a combined 134,000 (June: +24,000; July: +110,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) declined by 0.2 percentage point, to 5.2%, as gains among the employed (+509,000) significantly outpaced expansion of the civilian labor force (+190,000). 

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Observations from the employment reports include:

* Goods-producing industries gained a rather miniscule 40,000 jobs; service-providers: +195,000. Notable job gains occurred in professional and business services (+74,000), transportation and warehousing (+53,200), private education (+40,200), and other services (+37,000). Employment in retail trade (-28,500), and food service and drinking places (-41,500) declined over the month. Manufacturing added 37,000 jobs. That result is at odds with the change in the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which contracted in August. Wood Products employment rose by 1,800 (ISM was unchanged); Paper and Paper Products: +800 (ISM fell); Construction: -3,000 (ISM rose).

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* The number of employment-age persons not in the labor force edged lower (-49,000) to 100.1 million. Consequently, the employment-population ratio (EPR) inched up to 58.5%; i.e., nearly six out of 10 in the employment-age population are presently employed. 

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* Although the civilian labor force expanded by 190,000 in August, the labor force participation rate was unchanged at 61.7%. Average hourly earnings of all private employees increased by $0.17 (to $30.73), and the year-over-year increase jumped to +4.3%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.14, to $25.99 (+4.8% YoY). Since the average workweek for all employees on private nonfarm payrolls was unchanged at 34.7 hours, average weekly earnings increased by $5.90, to $1,066.33 (+4.4% YoY). With the consumer price index running at an annual rate of +5.4% in July, even those who are employed are -- on average – not keeping up with the official inflation rate.

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* Full-time jobs nudged down (30,000) to 127.4 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- slipped by 14,000, whereas those working part time for non-economic reasons jumped by 272,000; multiple-job holders advanced by 15,000.

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For a “sanity test” of the job 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 rose by $13.4 billion, to $229.9 billion (+6.2% MoM; +23.7% YoY). 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 20.7% above the year-earlier average.

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.