U.S. Hiring and Wage Growth Jump in August

U.S. monthly job gains exceeded many economists’ estimates in August, with 201,000 positions created marking 95 consecutive months of gains, according to the Bureau of Labor Statistics. The unemployment rate held steady at 3.9% for the second consecutive month and the average hourly earnings for all employees jumped 2.9% from last August – its best performance since June 2009.

Almost 1.7 million jobs have been added in the first eight months of 2018 compared to just over 1.5 million in the same period in 2017. Annual job gains reached 2.33 million in August, about 62,000 jobs more than August 2017’s annual total. This annual growth expanded the job base by 1.6%.

The U3, or “headline,” unemployment rate remains low despite a slight decrease in the labor force participation rate and an increase in those not in the labor force. The tight labor market may finally be pushing wages higher as economists have predicted.

Revisions to the previous two months’ numbers resulted in a net decrease of 50,000 jobs over the original estimates. June’s job gain figure was revised down, from 248,000 to 208,000, and July’s gains were revised down from 157,000 to 147,000.

These steady monthly job gains and tight unemployment rate pushed average hourly earnings for privately employed workers up 0.4% between July and August, the highest monthly increase this year. This took average wages to $27.16, up $0.77, or 2.9%, year-over-year. Annual wage growth had been relatively flat, averaging just 2.6% for all of 2016 and 2017, but has averaged 2.8% over the past four months.

The civilian labor force (CLF) participation rate dipped 20 basis points (bps) from July, to 62.7% in August, and the employment-population ratio of 60.3% also declined 20 bps from the previous month. Although the CLF participation rate has essentially held steady for the past four years, averaging 62.8% since 2014, the employment-population ratio has been slowly increasing since 2011, despite this month’s showing.

The number of part-time workers for economic reasons (4.38 million in August) decreased by 188,000 from July and was down by 830,000 from August 2017. The U6 unemployment rate, which includes these part-timers and marginally attached workers, decreased to 7.4% in August, down 10 bps from July and 120 bps from one year ago.

The number of long-term unemployed workers (out of work for 27 weeks or more) decreased by 103,000 from July, to 1.33 million, and was 403,000 workers less than the August 2017 figure, on a seasonally adjusted basis. The number of multiple jobholders increased sharply, by 570,000 year-over-year, to 7.5 million, as workers looking for additional income are finding second jobs. Meanwhile, the number of discouraged workers not in the workforce (434,000) decreased by 14,000 from one year ago.

Industry Focus

As they do each month, seasonally adjusted industry job gains for August varied across industry categories, with a few strong performances and some moderate losses. Solid gains occurred in the Professional and Business Services (+53,000), Education and Health Services (+53,000), and Trade, Transportation and Utilities (+37,000) industries.

• The Professional and Business Services supersector’s job gains in August were split between the higher-paying professional and technical services sector (+27,600) and the administrative and waste services sector (+20,900). Half of the latter sector’s gains were in temporary help services subsector (+10,000).

• Strong gains in the health care sector’s employment (+33,200) in August are attributed primarily to the ambulatory health care services subsector (+21,100), but hospitals (+8,200) and nursing and residential care (+3,900) made gains as well. Educational services (+11,900) and social assistance (+7,500) added to the Education and Health Services supersector’s August total as well.

• With the recent increases in durable goods manufacturing jobs, it follows that durable goods wholesale trade jobs would follow. They were up 13,600 in August, comprising the larger share of wholesale trade’s 22,400 job gain last month. Transportation added another 20,200 jobs in August, the most gains coming in truck transportation (+5,700) and transit and ground passenger transportation (+5,000). The only negative in the Trade, Transportation and Utilities supersector in August was the retail trade sector, which lost 5,900 jobs, as gains in several subsectors were offset by a 20,800 loss in clothing and accessories stores.

• Despite a widespread shortage of skilled workers, the Construction industry continues to grow with a net gain of 23,000 jobs, as both residential (+8,700) and nonresidential (+6,600) specialty trade contractors contributed. The construction of buildings subsector added 7,400 jobs as well.

• Leisure and Hospitality’s gain of 17,000 jobs in August was entirely in the food services and drinking places subsector (+17,500).

• The Other Services sector gained 13,000 jobs, most of it in the personal and laundry services subsector (+8,700).

• The Financial Activities industry’s net gain of 11,000 jobs in August were in the finance and insurance (+5,400) and real estate and rental and leasing (+4,900) subsectors.

• The energy industry continues to rebound with the 6,000 jobs gained in the Mining and Logging industry coming from the support activities for mining (+6,300) subsector.

• The Manufacturing industry’s growth trajectory paused in August, with a net loss of 3,000 jobs, although it is too early to tell if trade tariffs are a factor. The loss occurred in the durable goods sector (-4,000) as motor vehicle manufacturing shed 4,900 jobs in August. Nondurable goods manufacturing increased by 1,000 jobs, as gains in chemicals (+4,600) and paper (+1,800) were somewhat offset by losses in plastics and rubber (-3,600) and food manufacturing (-1,300).

• The Government sector retracted by 3,000 jobs in August, as local government employment retrenched by 2,000 employees.

• The Information industry lost 6,000 jobs in August as the volatile motion picture and sound recording industry (-3,800) added to losses in telecommunications (-4,000).