August 2023 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed nonfarm employers adding 187,000 jobs in August (170,000 expected). June and July 2023 employment changes were revised down by a combined 110,000 (June: -80,000; July: -30,000). Once again, employment gains have now been revised lower for every historical month in 2023; particularly noteworthy, June was originally reported as +209,000 but now stands at +105,000 (versus original expectations of 213,000).

Meanwhile, the unemployment rate (based upon the BLS’s household survey) jumped by 0.3 percentage point (PP) to 3.8%, as the labor force expanded by 736,000 but only 222,000 became employed. 

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Observations from the employment reports include:

* Goods-producing industries added 36,000 jobs; service providers: +151,000. Employment continued to trend up in health care (+70,900), leisure and hospitality (+40,000), social assistance (+26,400), and construction (+22,000). Employment in transportation and warehousing declined (-34,200). Total nonfarm employment (156.3 million) is now 4.0 million jobs above its pre-pandemic level in February 2020 (private sector: +4.3 million; public sector: -213,000). That said, employment is also perhaps 5.4 million below its potential if accounting for growth in the working-age population since January 2006.

Manufacturing gained 16,000 jobs, led by durable goods (+12,000). That result may be consistent with the change in the Institute for Supply Management (ISM) manufacturing employment subindex, which contracted more slowly (rising from 44.4 to 48.5) in August. Wood products manufacturing gained 3,100 jobs (ISM was unchanged); paper manufacturing: -400 (ISM decreased); construction: +22,000 (ISM not yet reported).

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* The number of employment-age persons not in the labor force fell (-525,000) to 99.4 million; that level is 4.2 million higher than in February 2020. Because growth in the number of employed (+222,000) barely outpaced working-age civilian population growth (+211,000), the employment-population ratio (EPR) remained at 60.4%, which is 0.7PP below its February 2020 level. 

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* Because the working-age civilian population grew by 211,000 while the labor force expanded by 736,000, the labor force participation rate rose to 62.8%. Average hourly earnings of all private employees nudged up by $0.08 (to $33.82), and the year-over-year increase decelerated to +4.2%. Despite the average workweek for all employees on private nonfarm payrolls lengthening to 34.4 hours, average weekly earnings rose (+$6.13) to $1,163.41 (+3.9% YoY). With the consumer price index running at an annual rate of +3.2% in July, the average worker appears to have gained a bit of purchasing power. Average hourly wages have generally lagged CPI since April 2021; average weekly wages since June 2021.

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* Full-time workers fell (-85,000) to 134.2 million; there are now 3.4 million more full-time jobs than in February 2020. For perspective, however, the non-institutional working-age civilian population has risen by nearly 7.6 million during that period. 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 -- jumped by 221,000, while those working part time for non-economic reasons inched higher (+4,000); multiple-job holders: -85,000. 

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For a “sanity test” of the job numbers, we consult employment withholding/FICA taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in August edged up by $0.25 billion, to $242.8 billion (+0.1% MoM; -4.2% 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 up 1.0% from 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.