The August employment report was better than expected, as private payrolls rose 67,000, roughly double what had been anticipated. And previous months were revised up, too, so that the three-month average private-payroll increase is now 78,000; a month ago it stood at 51,000. Viewed in isolation, a 67,000 private-payroll increase this far into the recovery is very poor. Nonetheless, viewed against low expectations and fears that the economy may be tumbling into a double-dip recession, today's report is good news. It suggests that the recovery may be wobbly, but that it is still staggering forward.
Total payrolls fell 54,000 this month, as another 114,000 temporary Census jobs were eliminated. The unemployment rate rose one-tenth a point, to 9.6%, as the labor force jumped.
In the details, manufacturing lost 27,000 jobs, although 22,000 of those were in the motor vehicles sector, reversing a mirror-image 22,000 increase in July. Manufacturers shortened the usual summer vehicle production shutdowns in July in order to rebuild inventory. That meant a blip in seasonally adjusted jobs during July that reversed in August. The manufacturing workweek edged up to 40.2 hours, from 40.1 hours. Production-worker hours were flat, after the autos-boosted 0.5% increase in July. Manufacturing is still growing, but has lost momentum as the impetus from the turn in the inventory cycle has faded.
Construction provided one of the upside surprises, adding 19,000 jobs in August, after a 4,000 drop in July. The swing is partly strike related, as a strike took out 10,000 jobs in July that returned in August. Excluding the strike, the figures show 9,000 jobs added in August and 6,000 added in July. Residential construction lost another 10,000 jobs in August—not surprising, since housing activity is suffering from a post-tax credit payback—but there were 18,000 jobs added in nonresidential construction and 11,000 added in heavy and civil engineering. Stimulus spending is probably partly responsible for these gains.
In the private-services sector, 67,000 jobs were added in August, after 70,000 in July (revised up from an initial estimate of 38,000). The picture across sectors was mixed. Education and health led the way with 45,000 jobs, of which 28,000 were in the health sector. And business services added 20,000 jobs, as temporary help rose 17,000, after dropping by 1,000 in July. The improvement in temporary help is important because it usually acts as a leading indicator of permanent hiring. Leisure and hospitality added 13,000 jobs. But trade, transport, and utilities lost 9,000 jobs, driven lower by retail (down 5,000) and transport and warehousing (down 7,000). Financial services lost 4,000 jobs, less than in recent months
The government shed 121,000 jobs, as 114,000 temporary Census workers were let go. There were still 82,000 Census workers in place, whose departure will drag down future reports. Overall, federal employment fell 111,000, as non-Census employment rose slightly.
State and local governments shed another 10,000 jobs, but their job cuts for July, originally estimated at 48,000, were revised to just 18,000. So budget cuts at the start of the fiscal year did not bite as hard as first thought.
The private workweek was steady, at 34.2 hours. With private employment barely higher and the workweek flat, total hours-worked in the private sector was unchanged. Hours worked are on track for an increase of just less than 2.0% in the third quarter, slower than the 3.3% advance in the second quarter. Average hourly earnings rose 0.3%, boosting income for those in work, so that total private payrolls rose 0.3%.
The unemployment rate advanced to 9.6%, from 9.5% in July. Household employment rose by 290,000, but the labor force rose by a much greater 550,000. It is very hard—if not impossible—to make sense of month-to-month movements in the labor force since they are so volatile. But the rise in the labor force this month is a reminder that to bring down the unemployment rate, jobs must be found not just to meet the normal trend growth in labor supply, but also to employ workers who will come back into the labor force when they perceive that jobs are available. As a result, unemployment will probably get worse before it gets better.
The most comprehensive measure of underemployment (U-6)—which includes workers who would like a job but are not currently looking, plus those working part time who would rather work full time—rose from 16.5% to 16.7%. The numbers of those unemployed for 27 weeks and longer fell by 143,000, although it is hard to know how encouraging that is, since we do not know whether those people found work or left the labor force. The increase in unemployment was concentrated in those out of work for between five and fourteen weeks (up 575,000), which may reflect unemployed ex-Census workers.
The jobs report is "good" only in comparison with low expectations, but that is still important news. It suggests that the economy is still growing, albeit slowly (probably in the 1.0–1.5% range in the third quarter) and eases fears that it is slipping back into the feared "double-dip" recession.
The figures take some of the pressure off the Federal Reserve to do something quickly to shore up the recovery, but with unemployment edging back into the high-9% range, they will not help the administration as the mid-term elections approach. And it's too late for any policies enacted now to make the economy look better by Election Day.
