The U.S. economy unexpectedly lost 4k jobs in August, the first monthly decline since 2003. Consensus had been looking for a 100k increase. Surprisingly, the unemployment rate held steady at 4.6%, where it has hovered for the past year. Hourly earnings and workweek length were both as expected.
The four thousand drop in jobs in August was accompanied by large revisions for the prior few months. Both June and July were revised down to just below 70k each from 92k and 126k previously, a cumulative revision lower of 81k in two months. Over the last three months, monthly growth has averaged 44k new jobs., with private payrolls growing and average 72k per month and the government shrinking by 28k per month (creating an unusual string of three straight months of decline). August and September are often volatile for government education employment because of timing differences in hiring new teachers for the school year. Less hiring this year meant a decline of 32k in August.
Manufacturing jobs fell a large -46k in August, and has lost 215k jobs over the past year. Job losses were widespread across industries. Construction jobs fell -22k in August, mainly in residential construction, and have declined almost 100k versus the peak a year ago. Service jobs only grew by 60k, quite a deceleration from the 202k added in May. Net growth in financial jobs was zero for the month. The government also shed 28k jobs in August. Temporary help demand continues to trend lower, and has fallen 72k year-to-date.
On the plus side, healthcare demand remains strong adding +35k in August and almost 400k over the past year. Leisure and hospitality also remains a strong growth area, adding +24k MoM and +350k YoY. Retail jobs grew +13k in August.
Average hourly and weekly earnings both grew +.3% MoM, and +3.9% YoY, continuing at trend. In hourly pay this worked out to a 5 cent raise to $17.50 average pay per hour, or $591.50 per week. Hours worked held constant at 33.8, with manufacturing hours also holding steady at 41.3 hours per week. Factory overtime eased off to 4.1 hours, the low for the past six months. Net aggregate hours worked was unchanged, but has increased 1.5% when the growth of the past three months is annualized. The net aggregate hours worked in manufacturing fell by +.3% MoM, in conjunction with the fewer hours of overtime.
The pool of available labor fell -62k MoM, and size of the civilian labor force fell by -340k MoM, causing the participation rate to fall to 65.8% from 66.1% in July. Most of this decline was due to teenagers going back to school. The number of people working part-time because they can't find full-time employment has risen about 360k over the past year. The household measure of employment fell -316k in August, a significant increase from the -17k monthly average YTD. The similar size drops in the civilian labor force and household survey are what allowed the unemployment rate to hold steady rather than rise.
Treasuries immediately rallied on this weak employment growth figure, pushing interest rates down. Two year Treasury yields are down 15bp, and ten year yields are down 7.5bp since the 5 o'clock close yesterday. Futures have nudged up the probability of a 50bp cut in the Fed's target rate to 70%. The dollar has also lost considerable ground since the announcement. The dollar index has fallen to test the 80 level again, and gold has rallied another $8 this morning.
This is the first clear indication that the turmoil experienced in the financial markets this summer is beginning to spill into the "real" economy, and not just confidence measures. Odds are increasing that the Fed won't wait till Sept 18th to cut rates.
See attached chart for monthly change in employment growth.
The four thousand drop in jobs in August was accompanied by large revisions for the prior few months. Both June and July were revised down to just below 70k each from 92k and 126k previously, a cumulative revision lower of 81k in two months. Over the last three months, monthly growth has averaged 44k new jobs., with private payrolls growing and average 72k per month and the government shrinking by 28k per month (creating an unusual string of three straight months of decline). August and September are often volatile for government education employment because of timing differences in hiring new teachers for the school year. Less hiring this year meant a decline of 32k in August.
Manufacturing jobs fell a large -46k in August, and has lost 215k jobs over the past year. Job losses were widespread across industries. Construction jobs fell -22k in August, mainly in residential construction, and have declined almost 100k versus the peak a year ago. Service jobs only grew by 60k, quite a deceleration from the 202k added in May. Net growth in financial jobs was zero for the month. The government also shed 28k jobs in August. Temporary help demand continues to trend lower, and has fallen 72k year-to-date.
On the plus side, healthcare demand remains strong adding +35k in August and almost 400k over the past year. Leisure and hospitality also remains a strong growth area, adding +24k MoM and +350k YoY. Retail jobs grew +13k in August.
Average hourly and weekly earnings both grew +.3% MoM, and +3.9% YoY, continuing at trend. In hourly pay this worked out to a 5 cent raise to $17.50 average pay per hour, or $591.50 per week. Hours worked held constant at 33.8, with manufacturing hours also holding steady at 41.3 hours per week. Factory overtime eased off to 4.1 hours, the low for the past six months. Net aggregate hours worked was unchanged, but has increased 1.5% when the growth of the past three months is annualized. The net aggregate hours worked in manufacturing fell by +.3% MoM, in conjunction with the fewer hours of overtime.
The pool of available labor fell -62k MoM, and size of the civilian labor force fell by -340k MoM, causing the participation rate to fall to 65.8% from 66.1% in July. Most of this decline was due to teenagers going back to school. The number of people working part-time because they can't find full-time employment has risen about 360k over the past year. The household measure of employment fell -316k in August, a significant increase from the -17k monthly average YTD. The similar size drops in the civilian labor force and household survey are what allowed the unemployment rate to hold steady rather than rise.
Treasuries immediately rallied on this weak employment growth figure, pushing interest rates down. Two year Treasury yields are down 15bp, and ten year yields are down 7.5bp since the 5 o'clock close yesterday. Futures have nudged up the probability of a 50bp cut in the Fed's target rate to 70%. The dollar has also lost considerable ground since the announcement. The dollar index has fallen to test the 80 level again, and gold has rallied another $8 this morning.
This is the first clear indication that the turmoil experienced in the financial markets this summer is beginning to spill into the "real" economy, and not just confidence measures. Odds are increasing that the Fed won't wait till Sept 18th to cut rates.
See attached chart for monthly change in employment growth.
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