August jobs report: despite a good headline number, the decelerating trend resumes I have written a number of times since February that the short leading indicators have signaled that we should expect weaker monthly employment reports, with both fewer new jobs and a higher unemployment rate. That was completely *not* the case in July, In August, would the decelerating trend kick in again? That it did. Since February the 3 month average in new jobs has decelerated from over 500,000 to 378,000. And this month the unemployment rate increased to a 6 month high. Here’s my in depth synopsis. HEADLINES: 315,000 jobs added. Private sector jobs increased 308,000. Government jobs increased by 7,000. The alternate, and more volatile measure in
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I have written a number of times since February that the short leading indicators have signaled that we should expect weaker monthly employment reports, with both fewer new jobs and a higher unemployment rate. That was completely *not* the case in July, In August, would the decelerating trend kick in again?
That it did. Since February the 3 month average in new jobs has decelerated from over 500,000 to 378,000. And this month the unemployment rate increased to a 6 month high.
Here’s my in depth synopsis.
- 315,000 jobs added. Private sector jobs increased 308,000. Government jobs increased by 7,000.
- The alternate, and more volatile measure in the household report indicated a gain of 442,000 jobs. The above household number factors into the unemployment and underemployment rates below.
- U3 unemployment rate rose 0.2% to 3.7%.
- U6 underemployment rate rose 0.3% to 7.0%.
- Those not in the labor force at all, but who want a job now, declined -351,000 to 5.549 million, compared with 4.996 million in February 2020.
- Those on temporary layoff declined -0,000 to 782,000.
- Permanent job losers increased 187,000 to 1,354,000.
- June was revised downward by -105,000, and July was also revised downward by -2,000, for a net decrease of -107,000 jobs compared with previous reports.
Leading employment indicators of a slowdown or recession
These are leading sectors for the economy overall, and will help us gauge whether the strong rebound from the pandemic will continue. These were mixed:
- the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.2 hours to 40.9 hours.
- Manufacturing jobs increased 22,000, and are at a level higher than before the pandemic.
- Construction jobs increased 16,000, also at a level higher than before the pandemic.
- Residential construction jobs, which are even more leading, rose by 2,300.
- Temporary jobs rose by 11,600. Since the beginning of the pandemic, nearly 300,000 such jobs have been gained.
- the number of people unemployed for 5 weeks or less rose by 143,000 to 2,223,000, slightly above its pre-pandemic level.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel rose $0.10 to $27.68, which is a 6.1% YoY gain, a further decline of -0.1% from last month and its 6.7% peak at the beginning of this year.
Aggregate hours and wages:
- the index of aggregate hours worked for non-managerial workers was unchanged which is above its level just before the pandemic.
- the index of aggregate payrolls for non-managerial workers rose by 0.3%, which was higher than inflation for the month, but at just under 0.7%averaged over 3 months remains slightly below the average inflation gain monthly in that period.
Other significant data:
- Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose 31,000, but are still about -7% below their pre-pandemic peak.
- Within the leisure and hospitality sector, food and drink establishments added 18,200 jobs, but are still about 600,000, or -5% below their pre-pandemic peak.
- Professional and business employment increased by 68,000, over 1,000,000 above its pre-pandemic peak.
- Full time jobs declined -242,000 in the household report.
- Part time jobs increased 413,000 in the household report.
- The number of job holders who were part time for economic reasons rose 225,000 to 4,149,000.
- The Labor Force Participation Rate increased 0.3% to 62.4%, vs. 63.4% in February 2020.
This report was positive, but much more mixed than last month’s report. The overall employment gain continued strong by historical standards, with gains in manufacturing, construction, and high paying professional and business jobs, as well as temporary positions. The hard-hit leisure and hospitality sector also continued to recover. The labor force participation rate also increased. Although the YoY pace of wages decelerated, it was still strong.
But there were lots of disappointing and outright negative indicators as well. Full time jobs decreased; the household gain was driven by part time employment. Average hours in manufacturing, which lead manufacturing jobs, declined to a 12 year low, and are down -0.5% YoY, a change in line with past steep slowdowns and recessions. Aggregate hours, a more finely grained measure than the number of jobs, were completely flat. Revisions to past months were negative, re-asserting a pattern that has been in place most of this year.
Most of all, both the unemployment and underemployment rates rose. As I have written a number of times in the past several months, I have been expecting this, as it was telegraphed by the rise in initial jobless claims.
My take is that this report is in line with a weakening jobs picture, although the headline number of gains remained historically strong.