- by New Deal democrat
My Big Theme for the past few months has been that the AI Boom (or possibly bubble) is counterbalancing a stagnant or even shallowly recessionary rest of the economy. Last month I wrote that July’s poor jobs report, which showed a -23,000 decline, had “a MAJOR caveat. Take out the -49,600 loss in local government education jobs, and we eked out a +27,000 gain for the month.” This month had the same caveat in reverse. Take out the 41,900 gain in local government jobs, and this month’s gain, while still good, was +120,000.
Below is my in depth synopsis.
HEADLINES:
- +162,000 jobs gained. Private sector jobs increased 127,000, while government jobs added 40,000, all of which were in local education. The three month average rose to 71,000.
- The pattern of downward revisions to previous months was reversed this month, as June was revised higher by +11,000, and July was revised higher by +44,000 (from a decline to a gain of +21,000) for a total increase of +55,000.
- The alternate, and more volatile measure in the household report, rose sharply, by +569,000 jobs. On a YoY basis, this series which had been negative for six months in a row, is now higher by 1.414 million.
- The U3 unemployment rate remained steady at 4.1%, its lowest level in two years.
- The U6 underemployment rate declined -0.2% to 7.7%, its lowest in over 12 months.
- Further out on the spectrum, those who are not in the labor force but want a job now declined -173,000 to 5.747 million, the lowest number in the past 12 months..
Leading employment indicators of a slowdown or recession
These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn vs. rebounding. These were almost entirely positive for the second month in a row.
- The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, was unchanged at 41.7 hours, equal to the highest number in 5 years, just surpassing its 2021 peak.
- Manufacturing jobs rose +16,000, the 5th increase in the last 12 months.
- Truck driving reversed its decline for the second month in a row, increasing by +4,800.
- Construction jobs rose +22,000.
- Residential construction jobs, which are even more leading, rebounded their 3 year low last month, up +7,300.
- Goods producing jobs as a whole rose +41,000.
- Temporary jobs, which had declined by over -650,000 since late 2022, rose by another +6,800, continuing to improve from their post-pandemic low set last October.
- The number of people unemployed for 5 weeks or less rose +40,000 to 2.000 million, still very low compared with the last 3 years.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.11, or +0.3%, to $32.53, for a YoY gain of +3.3%. Except for last month’s +3.2%, and several months affected by pandemic shutdowns, this is the lowest since December 2019. This is equal to the 3.3% YoY inflation rate as of July.
Aggregate hours and wages:
- The index of aggregate hours worked for non-managerial workers rosse +0.1%, and is up 0.9% YoY, about average for the past 12 months.
- The index of aggregate payrolls for non-managerial workers rose a sharp +0.5%, and is up 4.0% YoY, tied for the lowest comparison for the past 5 years, but up 0.7% above the YoY inflation rate through July.
Other significant data:
- Professional and business employment rose for the fifth month in a row, by +10,000. These tend to be well-paying jobs. This remains above its low from last October, and has turned higher YoY as well.
- The employment population ratio reversed its recent declines, rising +0.2% to 59.1%, vs. 61.1% in February 2020, and its lowest since October 2021.
- The Labor Force Participation Rate rose +0.2% to 61.6% , vs. 63.4% in February 2020, and the lowest since February 2021. IMPORTANT: both the EPOP and LFPR are greatly affected by the retiring Boomer population. In the prime age 25-54 demographic, they are virtually unchanged.
SUMMARY
Yesterday “finance bro” George Peakes commented on Bluesky that “People really want Trump to be an economic disaster and sorry, it's just not playing out that way;” and more succinctly agreed with a response that “He is an economic disaster (over the long term, given plausible models and parameters) but not the short term (recessions are not caused by vice).” This month’s jobs report is potent evidence of that point.
Most importantly, not only was the headline positive, and not only was the unemployment rate tied for a two year low (in accord with what I’ve been writing almost every week as a trend telegraphed by low jobless claims), but as indicated above, almost *all* of the leading indicators in the report, chiefly dealing with the goods-producing sector, continued to be positive, of a piece with the positive trends we have seen in the ISM and regional Fed manufacturing indexes for almost a year. And several “problem children,” i.e., professional and service jobs and temporary help, continued their rebounds. There is more tenuous evidence of a rebound in trucking as well.
To the extent there was a significant negative, it was that nonsupervisory wages continue to grow at a relatively low rate, and if inflation in August picked up again with gas price increases, meaning that real, inflation adjusted wages could be negative YoY for the 4th month in a row.
But given the breadth of the gains, and the positive leading signals going forward, this was probably the best report so far this year. More evidence of an inflationary expansion.
