August 2022 Employment Report

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The Bureau of Labor Statistics‘ (BLS) establishment survey showed nonfarm employers added 315,000 jobs in August, slightly better than the 293,000 expected. However, June and July employment changes were revised down by a combined 107,000 (June: -105,000; July: -2,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked up by 0.2 percentage point, to 3.7% even though most (+442,000) of the people who contributed to the expansion of the labor force (+786,000) found work.

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Observations from the employment reports include:

* The correspondence between the establishment (+315,000 jobs) and household surveys (+442,000 employed) was better than usual.

* Goods-producing industries added 45,000 jobs; service-providers: +270,000. Notable job gains occurred in professional and business services (+68,000), health care (+48,200), and retail trade (+44,000). Total nonfarm employment (152.7 million) is now 240,000 jobs above its pre-pandemic level in February 2020. Private-sector employment is 885,000 higher than in February 2020, while government employment is 645,000 lower. Employment is also perhaps nearly 7.6 million below its potential if accounting for growth in the working-age population since January 2006.

Manufacturing added 22,000 jobs. That result seems to be consistent with the change in the Institute for Supply Management’s (ISM) manufacturing employment subindex, which moved back into expansion in August. Wood products employment contracted by 100 (ISM fell); paper and paper products: -700 (ISM fell); construction: +16,000 (ISM not yet reported).

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* The number of employment-age persons not in the labor force fell (-613,000) to 99.4 million; that level is 4.3 million higher than in February 2020. Given the above-mentioned job gains, the employment-population ratio (EPR) edged up to 60.1%; the EPR is 1.1PP below the February 2020 level. 

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* Because the civilian labor force expanded by 786,000 in August, the labor force participation rate rebounded to 62.4%. Average hourly earnings of all private employees increased by $0.10 (to $32.36), and the year-over-year increase was unchanged at +5.2%. However, since the average workweek for all employees on private nonfarm payrolls slipped to 34.5 hours, average weekly earnings were virtually unchanged (+$0.22) to $1,116.20 (but slumped to just +2.6% YoY). With the consumer price index running at an annual rate of +8.5% in July, the average worker keeps losing purchasing power. In fact, average hourly wages have lagged CPI since April 2021; average weekly wages since June 2021.

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* Full-time jobs fell (-242,000) to 132.3 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 -- rose by 225,000, while those working part time for non-economic reasons slipped (-59,000); multiple-job holders: +114,000.

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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 increased by $11.0 billion, to $253.4 billion (+11.0% MoM; +10.2% 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 5.3% 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.