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Employment Situation: Job Gains Slow, Wages Push Higher

September 7, 2018
Bottom Line: August saw stronger than expected payroll gains, but there were negative revisions to June and July tallies that subtracted 50k jobs, more than offsetting the better August print. Job creation has averaged 185k over the past 3 months vs. the past 12 months average of 194k, suggesting a slight deceleration in the trend rate of job creation, as would be expected at this point in the cycle. Wages were stronger than expected with weekly earnings up 0.37% and year-on-year gains in average hourly earnings hitting cycle highs at 2.9%. Finally, The unemployment rate was unchanged -- over the past year, the unemployment rate has declined by 0.5 percentage points, the result of 2,071k more people finding jobs as 1,178k more people entered the labor force. Overall, while trend rate of job creation slowed modestly during the summer, the wage gains and continued decline in unemployment metrics like "working part-time for economic reasons" suggest that labor market continue to tighten.

Payroll Employment rose by 201k in August, compared with market expectations for an increase of 190k. The prior 2 months were revised, lower in July by 10k and lower in June by 40k.

Government jobs FELL by 3k. Consequently, private sector jobs ROSE by 204k. Private education jobs rose by 12k. Overall employment is now 1.6% ABOVE its year ago level, Over the past 12 months, 2,330k jobs have been created.

In August, the job gains were in:

  • Trade, Transportation & Utilities (+43k with -6k of those in Retail Trade),
  • Professional & Business Services (+53k with the addition of 10.0k in Temp Help Services),
  • Education & Health Services (+41k),
  • Construction (+23k),
  • Leisure & Hospitality (+17k),
  • Other Services (+13k),
  • Financial Activities (+11k), and
  • Manufacturing (-3k).
  • Jobs were shed in Manufacturing (-3k), and Information (-6k).

The Unemployment Rate was UNCHANGED at 3.9%, compared with market expectations for a small decline to 3.8%.

Household employment fell by 423k while the labor force declined by 469k, resulting in a decrease in the number of unemployed of 46k.

The Labor Force Participation Rate FELL by 0.2 percentage points to 62.7%. The Employment-Population Ratio FELL by 0.2 percentage points to 60.3%.

The number of people Working Part-Time for Economic Reasons FELL by 171k to 4,311k. while Long-Term Unemployment FELL by 103k to 1,332k (accounting for 21.4% of the unemployed), while the Mean Duration of Unemployment FELL by 0.6 weeks to 22.6 weeks.

There are now 6.2 million people officially unemployed. In addition, there are another 5,389k people who say they want a job but are not currently looking for one. Finally, another 4,311k people are working part-time because of slack economic conditions.

Hourly Earnings ROSE by 0.4% in August, above market expectations of 0.2%. Hourly earnings are now 2.9% ABOVE their year ago level.

Weekly Earnings also ROSE by 0.4%, the result of the change in hourly earnings and a steady workweek. Weekly earnings are now 3.2% ABOVE their year ago level. The Average Workweek was UNCHANGED at 34.5 hours, in line the market consensus at 34.5 hours.