August Jobs Report Murky
The economy added 151,000 jobs in August, short of the 175,000 expected. Payroll numbers also came in below expectations for the month and below their average monthly increase of 204,000 per month for the last year.The source of job growth continued recent trends. Various categories of services added jobs albeit at a diminished pace. Manufacturing, construction, wholesale and retail trade, and government were essentially flat. And mining continued to shed jobs. Mixed revisions to the previous two months did not materially change the numbers. Average weekly earnings were down slightly.
On the household side, the headline unemployment rate remained unchanged at 4.9 percent, while the broader measure of labor underutilization (U6) also remained unchanged at 9.7 percent.
The report does not provide any definitive clarity for policymakers. While the numbers were below expectations, they were not wildly weak. Those favoring a monetary tightening would have preferred to see something above 200,000, and that did not happen. But the floor did not collapse either; 151,000 is a satisfactory pace for our current demographics.
This lack of near-term clarity is also consistent with recent GDP reports, where the overall growth number was not particularly strong, but the most important component, consumer spending, showed considerable strength.
A fair conclusion to draw is that we were hoping this jobs report would provide some definitive signal, and it didn’t. It wasn’t as good as expected. Nor was it awful, but could give comfort to those who suggest that there is no urgency in any policy action.
Tom Cunningham holds a Ph.D. in economics from Columbia University and was senior economist with the Federal Reserve Bank of Atlanta from 1985 to 2015. Mr. Cunningham serves as a consultant to MST in the creation and ongoing development of the MST Virtual Economist.
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