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U.S. Job Gains Miss Expectations in August

U.S. Job Gains Miss Expectations in August

The U.S. economy added 130,000 jobs in August, below most economists’ expectations, but a solid month of growth considering low unemployment.

The monthly positive gain streak continued to 107 consecutive months, and the monthly average through August 2019 is about 158,250 jobs. The 12-month average for monthly job gain since August 2018 was 172,830 jobs per month, about 39,000 fewer jobs gained than the same period 12 months earlier.

Slowing monthly job gains may be expected given the ever-tightening labor pool. The already low unemployment rate remained unchanged from July at 3.7%.

Average hourly earnings growth for all employees topped 3% for the 13th consecutive month in August, coming in at 3.2%, exactly even with the 12-month average. The monthly gain between July and August was 0.4%, or $0.11 in the month. Annually, wages increased $0.88, to $28.11. After climbing steadily throughout 2018, earnings growth seems to have plateaued around the current 3.2% level.

A little more than 2.0 million jobs were added in the 12 months ending August 2019 compared to about 2.5 million for the same period ending August 2018. This annual growth expanded the job base 1.4%, below the average annual growth rate for the preceding 12 months (1.7%). It was the fourth consecutive month that growth fell below the prior year average. Revisions to the previous two months’ numbers resulted in 20,000 fewer jobs than initially reported as June’s job gain figure was revised from 193,000 jobs to 178,000 jobs, and July’s gains were revised from 164,000 to 159,000.

The civilian labor force (CLF) participation rate increased to 63.2% from last month, and was up 50 basis points (bps) from last year. The employment-population ratio of 60.9% was up 20 bps from last month and 60 bps from July 2018. We are finally seeing some real movement in both ratios. Although baby boomers are sometimes credited with the slowing job gain figures as they reach retirement age, the participation rate for the age cohort containing the oldest boomers (70 to 74) has only recently seen some decline in the rate – from a peak of 20.4% in February to 19.5% in August. The total number of unemployed (6.044 million) is down about 153,000 from last year, and the number of people not in the labor force who currently want a job has fallen from 5.4 million last August to 5.1 million currently.

The number of job leavers decreased by 52,000 month-over-month to 781,000 in August and was down 85,000 from last year, perhaps indicating some creeping concern for the jobs outlook. Job leavers are workers who quit or voluntarily leave their previous job and immediately began looking for new employment. The number of part-time workers for economic reasons (4.38 million in August) fell by just 13,000 from August 2018, and the number of part-time workers for non-economic reasons decreased by 179,000, to 21.3 million. The U6 unemployment rate, which includes part-timers for economic reasons and marginally attached workers, increased 20 bps to 7.2% from July, but was down from 7.4% in August 2018.

The number of long-term unemployed workers out of work for 27 weeks or more fell by 77,000 from August 2018 at 1.2 million, and the average duration of unemployment inched up over 20 weeks to 20.6. The number of multiple jobholders increased by 498,000 year-over-year at 8.04 million. Meanwhile, the number of discouraged workers not in the workforce (467,000) increased by 33,000 from one year ago.

Industry Focus

Monthly job gains by industry for August saw some of the usual gainers and a sharp increase in Government workers. Healthy monthly gains occurred in Professional and Business Services (+37,000), Education and Health Services (+32,000) and the aforementioned Government (+34,000). Most other industries had moderate gains or losses with the exception of the Trade, Transportation and Utilities industry (-11,000).

• The Professional and Business Services industry gain of 37,000 in August was spread pretty evenly among the three main sectors, with the higher-paying professional and technical services (+14,800) sector gaining the most. Management of companies gained 10,300 jobs in August while the administrative and waste services sector added 12,100 jobs. In perhaps a good sign for the economy, the subsector of temporary help services gained 15,400 jobs for the month as employers continue to staff up, tempering immediate fears of a potential recession.

• The Government sector’s 34,000 job gain for August was primarily at the federal level (+28,000), with an additional 6,000 increase in state government employment. The boost in federal workers was due to the approaching 2020 census and the temporary workers needed.

• The Education and Health Services industry’s 32,000 job gain in August was entirely in the health care and social assistance sector (+36,800) as education services contracted by 5,400 jobs. Ambulatory health care services (+12,100) and social assistance (+12,900) contributed the most, while hospitals gained 8,800 jobs for the month.

• The Financial Activities industry’s net gain of 15,000 jobs was split between finance and insurance (+7,500) and real estate and rental and leasing (+7,700), with the subsector of real estate adding 6,800 jobs by itself.

• The Construction industry gained 14,000 jobs in August, led by the construction of buildings sector (+8,800), particularly residential building (+7,000). Specialty trade added only 700 jobs, as losses in the residential subsector (-4,700) canceled 5,400 jobs gained in the nonresidential subsector.

• The Leisure and Hospitality industry had a moderate monthly gain of 12,000 jobs, entirely in the accommodation and food service (+12,200) sector, as the food services and drinking places subsector (+11,900) offset a mild loss in arts, entertainment, and recreation.

• Manufacturing industry gains slowed to a crawl, adding only 3,000 jobs in August. Durable goods manufacturing employment remained unchanged with losses in fabricated metal products (-1,700), machinery (-1,700) and furniture (-500) offsetting gains in computers (+2,300), nonmetallic mineral products (+1,200) and motor vehicles (+700). Nondurable goods (+3,000) also had mixed results with gains in the plastics and rubber products (+3,400) and miscellaneous (+2,800) outpacing losses in chemicals (-1,200) and petroleum products (-1,000).

• The Information industry saw no gain in August as job gains in the other information services (+3,400), publishing (+1,500), and broadcasting (+1,000) subsectors were stymied by losses in the telecommunications (-3,600), motion picture and sound recording (-1,300) and data processing (-900) subsectors.

• The Other Services sector had a mild loss of 1,000 jobs in August as membership associations and organizations lost 2,500 jobs for the month, while personal and laundry services gained 1,200.

• The Mining and Logging industry’s 5,000 job loss in August was all in the support activities for mining (-5,400) subsector. The logging sector actually gained 1,000 jobs for the month.

• Retail retrenchment continues to plaque the Trade, Transportation and Utilities supersector, as its 11,100 job loss in August was all in retail trade (-11,100), particularly general merchandise stores (-14,800). Wholesale trade saw a modest 2,900 job increase in August, while transportation and warehousing was virtually flat (-500).

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