September 01, 2023 | 09:09
U.S. Job Market Laboring On
Isn't this what we want? What we really really want? (Geez, where did that come from? I'm not even a Spice Girls fan.)
U.S. nonfarm payrolls rose 187k in August, beating expectations (especially those that changed after the ADP). And, with the net impact of 17,800 striking workers (according to the BLS), the headline was actually stronger than what was reported.... +205k.
However there were downward revisions to the prior two months... July's 187k is now 157k; and June's 185k is now 105k. Ouch. The jobless rate, as signalled by the Conference Board's survey, rose 0.3 ppts to an 18-month high of 3.8%. That was a surprise to consensus but note that the survey, while not a perfect indicator for moves in the jobless rate, serves as a decent signal. But the deterioration in the unemployment rate was not due to job losses: the labor force surged by 736k, the most in seven months, and overwhelming the household survey's 222k increase. What's that saying? If you build them, they will come? Well, the people are coming! The participation rate rose 0.2 ppts to a 42-month high (or February 2020) of 62.8%.... good news there!
Interesting factoids on the jobless rate: the biggest increase was in the 18-19 age bracket (these are seasonally adjusted), while the unemployment rate for those 25-54 inched up just 0.1 ppts, and was flat for those 35-44.
On the inflation front, average hourly earnings slowed... rising just 0.2% in the month, or 4.3% y/y. That's the smallest monthly increase in about a year and a half. With demand for workers cooling (not drying up.... far from that!), businesses aren't feeling forced to give in to all wage demands. And, aggregate hours worked jumped 0.4% in August, the most in a while.... hence, Q3 GDP is looking stronger than Q2. (Also with support from July's 0.6% jump in real PCE.)
On an industry basis, most were still hiring.... just at a slower pace (except for leisure & hospitality... still going!). But service-producing industries saw payrolls grow by 143k, the most in three months, while goods added 36k. Yellow's early-August bankruptcy showed up in the truck transportation sector (-37k jobs).
Note that the ADP nailed it this month..... private sector payrolls rose just 179k, but the most in three months.
Bottom Line: Easy does it. The job market is not exerting any pressure on the Fed to tighten further. And that is what 'we' want.