Friday, September 5, 2014

August jobs report: Jobs hit a speed bump

- by New Deal democrat


  • 142,000 jobs added to the economy
  • U3 unemployment rate declined from 6.2% to 6.1%
Wages and participation rates
  • Not in Labor Force, but Want a Job Now: up 45,000 to 6.304 million
  • Employment/population ratio ages 25-54: up 0.2% from 76.6% to 76.8% (NEW POST-RECESSION HIGH)
  • Average Weekly Earnings for Production and Nonsupervisory Personnel: up $.06 (or +.3%) from $20.62 to $20.68, up 2.4% YoY
June was revised downward by -31,000 to 267,000. July was revised upward by 3,000 to 212,000.  The net revision was thus -28,000. 

Since the economic expansion is well established, in recent months my focus has shifted to wages and the chronic heightened unemployment.  The headline numbers for August show a little progress on wages, and mixed results on participation.

Those who want a job now, but weren't even counted in the workforce were 4.3 million at the height of the tech boom, and were at 7.0 million a couple of years ago.  They have actually risen for the first eight months of this year. As noted above they were 6.3 million in August.  This is almost certainly due to the cutoff in extended unemployment benefits by Congress at the end of last year.

On the other hand, the participation rate in the prime working age group has made up 40% of its loss from its pre-recession high.

After inflation, real hourly wages for nonsupervisory employees probably increased from July to August. The YoY change in average hourly earnings is +2.4%, somewhat better than the inflation rate.

Finally, while the unemployment rate fell, it was because 64,000 people left the work force.  This only partially reverses last month's good number, with the net change in the civilian labor force over the last two months rose by 265,000, while the number of new jobs in the same two month period rose by 148,000.

The more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed but with a positive bias.

  • the average manufacturing workweek rose by +0.1 hours from 40.9 to 41.1.  This is one of the 10 components of the LEI, and will have a positive impact.

  • construction jobs creased by 20,000. YoY construction jobs are up over 200,000, or about 4%.  This is good news.

  • manufacturing jobs  were unchanged, and are up 168,000 YoY.

  • temporary jobs - a leading indicator for jobs overall - increased by 13,000.

  • the number of people unemployed for 5 weeks or less - a better leading indicator than initial jobless claims - increased by 22,000 to 2,609,000 compared with December's 2,255,000 low.

Other important coincident indicators help us paint a more complete picture of the present:

  • The average workweek for all nonsupervisory workers was unchanged at 33.0 hours.

  • Overtime hours was also unchanged at 3.4 hours.

  • the index of aggregate hours worked in the economy grew by 0.1% from 108.7 to 108.8. 

  • The broad U-6 unemployment rate, that includes discouraged workers decreased from 12.2% to 12.0%.

  • Part time jobs for economic reasons decreased by -234,000.
Other news included:
  • the alternate jobs number contained in the more volatile household survey increased by only 16,000 jobs.  The household survey jobs numbers had been lagging the establishment survey numbers, but as expected this difference has now been almost entirely made up, with the household survey showing a 2,189,000 increase in jobs YoY vs. 2,482,000 in the establishment survey. 

  • Government jobs increased by 8,000.
  • the overall employment to population ratio for all ages 16 and above was unchanged at 59.0% , and has risen by +0.4% YoY. The labor force participation rate fell from 62.9% to 62.8%, and has fallen by -0.4% YoY (but remember, this includes droves of retiring Boomers).

Relatively speaking, this was a poor report in comparison with the last 6 months.  But I wouldn't treat it as anything more than a speed bump. Most of the leading parts of the report were positive.  IN other words, this doesn't seem to herald a change in trend.

We did get a good number on wage growth, and we did get a good number on the prime age participation rate.  On the other hand, those who have dropped out of the labor force but would like to be employed remains signficiantly higher than it was at the end of last year.