August Employment Report Shows Solid Job, Wage Growth

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Friday’s key economic data point came from the Bureau of Labor Statistics (BLS) employment situation report for August. The unemployment rate remained unchanged from July at 3.9% and the U.S. economy added 201,000 jobs in the month. Economists had a consensus forecast for 195,000 new jobs and an unemployment rate of 3.8%.

Better news, both for workers and the economy, is that average hourly earnings for all employees rose by 10 cents an hour to $27.16 in August. Pay has risen by $0.77 an hour so far in 2018, up by 2.9%. For production and nonsupervisory employees, wages were up seven cents an hour in August to $22.73. The average workweek for all employees was unchanged month over month at 34.5 hours.

The stock market opened lower following the announcement but that is more likely due to an announcement from the White House as early as today on the imposition of further tariffs on China. Trump has threatened to slap $200 billion in additional tariffs on Chinese goods.

The labor force participation rate declined slightly from 62.9% to 62.7% and the employment-to-population ratio also declined by 0.2 percentage points, from 60.5% to 60.3%.

The change in total nonfarm payroll employment for June was revised down from a gain of 248,000 to 208,000, and the change for July was revised down from a gain of 157,000 to 147,000. With these revisions, employment gains in June and July combined were 50,000 less than previously reported.

The number of people not in the labor force rose from 95.6 million in July to 96.3 million in August. Year over year, the number of people not in the labor force rose by 1.53 million, while the number of people who currently want a job rose month over month from 5.16 million to 5.39 million.

Job gains occurred in health care, wholesale trade, construction, professional and business services and mining. The U.S. economy added 53,000 services jobs in August, 22,000 jobs in wholesale trade, 23,000 construction jobs and 20,000 jobs in transportation and warehousing. Employment growth has averaged 196,000 per month over the past 12 months.

August’s underemployment rate (the U-6 unemployment rate), which includes those out of work and those working part-time but who would like to have full-time work, stood at 7.4%, down 0.1 points from July and down by 1.2 points since August of last year.

The employment report chimes with other recent economic data: wages are rising, consumers are spending, and inflation remains low.

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