Unemployment held steady at 3.9 percent last month, while the US economy added 201,000 jobs, according to the August jobs report from the US Bureau of Labor statistics, released on Friday. The numbers of new jobs created in the previous two months were revised downward, however, by 248,000 to 208,000 for June and from 157,000 to 147,000 fro July—a total downward revision of 50,000.
Average hourly earnings rose by 10 cents to $27.16 in August, for a year-over-year gain of 77 cents or 2.9 percent. These numbers indicate that wage growth in the US may finally be accelerating again after years of stagnation despite a tight labor market, the New York Times reported:
Amy Glaser, a senior vice president at the staffing company Adecco, said she had noticed a significant change in employers’ willingness to increase hourly wages. “Now clients are talking in terms of dollars instead of cents for wage increases,” she said. During the busy holiday season, employees often jump from one business to another for an additional 50 cents an hour, Ms. Glaser said. Companies are trying to head off that exodus, she said, by starting seasonal hiring earlier — in August, instead of September and October — and by offering higher starting pay.
One sour note in Friday’s report, however, was that both the labor force participation rate and the employment-population ratio declined by 0.2 percentage points, to 62.7 percent and 60.3 percent, respectively. These figures suggest “an economy running awfully close to its capacity,” Neil Irwin observes at the Times’ Upshot blog:
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The US economy added 157,000 jobs last month, while the unemployment rate ticked down to 3.9 percent, Friday’s jobs report from the Bureau of Labor Statistics revealed. The labor force participation rate remained unchanged over both the month and the year, at 62.9 percent. The number of workers re-entering the job market decreased by 287,000 in July to 1.8 million, after having increased in June, causing the unemployment rate to increase that month from 3.8 to 4.0 percent.
The manufacturing sector added 37,000 jobs in July, mostly in durable goods. Economists have been bracing for an impact on this sector caused by President Donald Trump’s recent changes to US trade policies, but these effects have not yet appeared in the BLS data. Other sectors with notable job growth last month included professional and business services (51,000 new jobs), health care and social assistance (34,000), food services and drinking places (26,000), and construction (19,000). The retail sector gained 7,000 jobs, with 32,000 job losses in sporting goods, hobby, book, and music stores offsetting gains in other types of retail establishments.
Those lost retail jobs may be the reason why the report failed to meet economists’ expectations of 190,000 new jobs, CNBC’s Patti Domm points out, possibly due to the bankruptcy of one major retailer:
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The latest jobs numbers from the US Labor Department’s Bureau of Labor Statistics paint an encouraging picture of the state of the labor market, with new jobs being created at a steady clip and more people joining the workforce than leaving it. Total nonfarm employment increased by 213,000 last month, while the civilian labor force grew by 601,000, edging labor force participation up to 62.9 percent.
Unemployment increased from 3.8 to 4.0 percent as the number of unemployed persons increased by 499,000 to 6.6 million, but these changes reflected the large numbers of new job seekers, not people being thrown out of work. The bureau also revised its estimates for job growth upward for the previous two months, from 233,000 to 244,000 new jobs in May and from 159,000 to 175,000 in April.
Wage growth remains lower than in previous expansionary periods, with June’s earnings numbers showing a year-over-year increase of just 2.7 percent. Average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.98 last month. Coming after a long period of wage stagnation, these numbers are better than nothing for American workers, but still below economists’ expectations and barely enough to keep pace with inflation.
“Taken at face value,” Neil Irwin interprets at the New York Times, “it’s a sign that the hot job market is succeeding at pulling people off the sidelines and into the work force”:
It’s easy to imagine people who have become disengaged from the work force who, in this tightening job market, are more likely than they were a few years ago to see help wanted signs everywhere, or to have friends and acquaintances urge them to start working.
Unemployment across the US fell to 3.9 percent last month, its lowest level since December 2000, the latest jobs report from the Bureau of Labor Statistics showed, as the economy added 164,000 jobs. The increase in jobs was below the average monthly gain of 191,000 over the prior 12 months and the median estimate of 193,000 provided by economists to Bloomberg. However, job gains from the previous two months were also revised upward by a net 30,000 jobs. A broader measure of unemployment, including those marginally attached to the labor force or employed part time for economic reasons, fell from 8 percent in March to 7.8 percent in April.
Wage growth remained slow, however, with average hourly earnings rising 4 cents to $26.84, representing a 2.6 percent year-over-year-increase. That figure has dwindled from 2.9 percent in January, dampening hopes that the tight labor market would finally lead to accelerating wage growth for American workers. Nonetheless, Josh Wright, Chief Economist at iCIMS, tells the Washington Post that it’s “an exciting headline for the worker”:
“A real Goldilocks number, with job growth being great.” But pay stayed flat, so the Federal Reserve won’t likely feel pressure to raise rates before June. In other words, Wright said, the markets should respond favorably. “What we’re seeing here is steadiness,” he said. …
If the expansion further gains steam, analysts at the Fed said the unemployment rate could reach 3.7 percent this year, a figure not seen since 1969.
Also, the New York Times points out, “A year-over-year increase of 3 percent in hourly earnings is considered the trip wire that could prompt the Federal Reserve to raise its benchmark interest rate more aggressively than it has signaled”:
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US nonfarm payrolls rose by a seasonally adjusted 103,000 in March, while the more robust numbers from January and February were revised downward by a cumulative 50,000 in Friday’s monthly report from the Bureau of Labor Statistics, representing a marked decline from February, when the workforce grew at the strongest monthly rate since July 2016. The unemployment rate held steady at 4.1 percent for a sixth month, still the lowest since December 2000, while wages rose only slightly, by 8 cents an hour for a year-over-year increase of 2.7 percent.
Labor force participation fell incrementally from 63.0 percent in February to 62.9 percent in March. That’s better than the recent low of 62.3 percent in 2015, but the rate remains nearly the lowest the US has seen since the late 1970s, the Wall Street Journal’s Eric Morath observes. With the economy at approximately full employment, the government and employers alike are hoping to entice more non-working Americans off the sidelines, but have had limited success so far in that endeavor.
Friday’s numbers fell short of expectations. Economists surveyed by the Journal had predicted 178,000 new jobs and an unemployment rate of 4.0 percent. ADP’s independent monthly report, released on Wednesday, said companies had added 241,000 jobs last month. ADP’s numbers always tend to be higher those from the BLS, but this month’s divergence is unusually wide.
One possible factor in March’s sharp decline is the weather: The US was hit with a series of late winter storms this year, and as Washington Post economics correspondent Heather Long noted, there was major snowfall the week the BLS conducted its survey, which may have depressed its count and could mean these figures will be revised upward in future reports.
For Ben Casselman, economics reporter at the New York Times, the big-picture takeaways from the jobs numbers in early 2018 are that wage growth is still slower than economists would tend to expect and would like to see given the tightness of the labor market, and that while labor force participation isn’t falling off due to retirements in an aging workforce, Americans are not returning to the workforce in sufficient numbers to fill the shortages in the labor pool:
The February employment figures from the Bureau of Labor Statistics, released on Friday, depict a strong labor market, with the US economy adding 313,000 jobs: the largest monthly increase since July 2016 and extending the longest recorded labor market expansion in US history into its 89th month. Job growth figures were also revised upward for December and January by a total of 54,000. The unemployment rate held steady for the fifth month straight at 4.1 percent, the lowest rate since December 2000.
Economists had expected growth of around 200,000 jobs. Some observers attribute the spike in hiring to the massive corporate tax cut passed by Congress in December, but this is not a consensus view, the Washington Post reports:
“This is a result of fiscal stimulus — in other words: a $1.3 billion tax cut,” [Glassdoor chief economist Andrew Chamberlain] said. “Businesses are making decisions on a forward-looking basis. Even if the dollars aren’t in the pockets of companies yet, they’re making plans.”
Cathy Barrera, head economist at ZipRecuiter, an employment site, questioned that interpretation, asserting it’s still too early to see an impact from the tax measure. “Really for businesses, what matters is demand for their products,” she said. “If demand for products hasn’t gone up, there’s not more work for these companies to be doing.”
The only piece of not-so-great news in Friday’s jobs report was that February did not deliver the acceleration in wage growth that many economists were hoping for. Average hourly earnings for private nonfarm employees rose by 4 cents to $26.75, for a year-over-year figure of 2.6 percent, lower than the 2.9 percent figure reported for January (revised downward in this month’s report to 2.8 percent).
The combination of large job growth and low wage growth was reassuring news for Wall Street, the New York Times adds, as it points to continued economic expansion but eases fears of runaway inflation:
The US economy added 228,000 jobs in the month of November, outperforming economists’ expectations, while the unemployment rate remained at 4.1 percent, its lowest since 2000, according to the latest figures from the Department of Labor. Average earnings rose by five cents an hour, resulting in a total increase of 64 cents, or 2.5 percent, in the past year.
The jobs report reflects the continued strength of the American economy, with wage growth finally starting to pick up after a years-long period of stagnation despite of a historically tight labor market. It also shows that the mainland US has rebounded strongly from the major hurricanes that did extensive damage to Florida and Texas in September. The small job loss reported that month was later upward to a small gain, meaning the US has added jobs for 86 consecutive months. The monthly figures do not cover the territories of Puerto Rico and the US Virgin Islands, however, which were devastated by Hurricane Maria and are still struggling to rebuild.
The problem remains that the tightness of the labor market isn’t translating into real earnings growth for US workers, as most economic models predict it should. With talent in short supply, employers are under pressure to raise wages, the New York Times reports, and the slower-than-expected wage growth over the past year may reflect businesses being unable to afford the wages candidates are demanding:
Most economists expect wage growth to pick up as the unemployment rate falls. Other measures of earnings have already shown modestly faster gains, and there are signs that businesses are feeling pressure to raise pay. For the first time in six years, chief executives surveyed by the Business Roundtable, a coalition of big corporations, reported that labor expenses were their biggest cost pressure in the fourth quarter.