Jobs report: Lower in August, earlier revisions downward

[WendyBG]

https://www.bls.gov/news.release/empsit.nr0.htm

Employment Situation Summary

Transmission of material in this news release is embargoed until USDL-24-1817
8:30 a.m. (ET) Friday, September 6, 2024

THE EMPLOYMENT SITUATION – AUGUST 2024

Total nonfarm payroll employment increased by 142,000 in August, and the unemployment rate changed little at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in construction and health care.

Household Survey Data

Both the unemployment rate, at 4.2 percent, and the number of unemployed people, at 7.1 million, changed little in August. These measures are higher than a year earlier, when the jobless rate was 3.8 percent, and the number of unemployed people was 6.3 million.

Establishment Survey Data

Total nonfarm payroll employment increased by 142,000 over the month. Employment growth in August was in line with average job growth in recent months but was below the average monthly gain of 202,000 over the prior 12 months. In August, job gains occurred in construction and
health care.

The change in total nonfarm payroll employment for June was revised down by 61,000, from +179,000 to +118,000, and the change for July was revised down by 25,000, from +114,000 to +89,000. With these revisions, employment in June and July combined is 86,000 lower than previously reported. [end quote]

The unemployment rate counts only active job seekers. The labor force participation rate (which includes everyone over age 18 whether or not they are seeking employment) remained at 62.7 percent in August and is little changed over the year. The employment-population ratio also was unchanged in August, at 60.0 percent, but is down by 0.4 percentage point over the year.

Labor Force Participation Rate

https://www.nytimes.com/live/2024/09/06/business/jobs-report-august-economy

What to know about the latest report.

by Lydia DePillis, The New York Times, 9/6/2024

Wages came in stronger than expected: Average hourly earnings rose 0.4 percent in August from the previous month, or 3.8 percent from a year earlier, muddying a picture of declining labor demand. The average workweek also ticked up, indicating that workers are getting more hours.

Sector growth has narrowed even more: The industries adding significant numbers of jobs in August were health care and social assistance, food and drinking establishments, and construction, which has remained surprisingly resilient in the face of high interest rates. Manufacturing has not been so resilient, and shed 24,000 jobs… [end quote]

This is a lukewarm report. Consistent with this week’s PMI report, manufacturing is declining. The report is not recessionary since job growth is still consistent with pre-Covid rates although not robust.

The Fed will undoubtedly cut the fed funds rate by at least 0.25% this month. Will the somewhat weak jobs report cause them to cut by 0.5%? That’s what the markets would like to know. It’s not clear since slow but consistent growth is not the same as recession and may not indicate a coming recession.

Wendy

[Leap1]

@WendyBG

Wages came in stronger than expected: Average hourly earnings rose 0.4 percent in August from the previous month, or 3.8 percent from a year earlier, muddying a picture of declining labor demand. The average workweek also ticked up, indicating that workers are getting more hours.

Back in 1982 the 5% unemployment number became a topic. I think if we touch that it would be odd but possible. Remember rates are falling in the marketplace.

The 5% was to be the norm. Now with demand side economics again years later it would be high.

The wage news is not unexpected. It is central. Demand begets higher employment rates.

The number of people paying taxes has risen. The tax burden is spreading out. This in relative terms keeps taxes more modest. The reversion in the debt to real GDP ration works off this with more factory building. A good spiral we would be stupid to work against.

[DrBob2]

@Leap1

Back in 1982 the 5% unemployment number became a topic.

IIRC, getting unemployment down to 5% would have been a good trick in 1982. Unemployment that year peaked at over 10%.

DB2

[WendyBG]

@DrBob2

IIRC, getting unemployment down to 5% would have been a good trick in 1982. Unemployment that year peaked at over 10%.

I remember that recession well. Many of my customers, chemical manufacturing plants in New Jersey, closed…never to reopen. It seemed like forever that unemployment didn’t drop below 7.5%.

Unemployment Rate

For many years, 5% was considered “full employment.”

Wendy

[Leap1]

Today unemployment probably won’t peak at 5%.

We need a 50 bps rate cut.

The only consideration is the target rate. I do not know what is the lowest rate during this period the FED will entertain. I doubt it is that much lower. Perhaps 3.75% plus.

Google

Effective Federal Funds Rate is at 5.33%, compared to 5.33% the previous market day and 5.33% last year. This is higher than the long term average of 4.61%. The Effective Federal Funds Rate is the rate set by the FOMC (Federal Open Market Committee) for banks to borrow funds from each other.

[MarkR]

I’m not sure how useful unemployment statistics are overall. I think perhaps that employment statistics are more useful. The worrisome thing is that we still haven’t reached pre-covid employment levels, and that the growth in employment has stagnated, and even dropped a little, in recent months. It’s pretty clear in this chart.