By Ben Sirois, Economist, Dodge Data & Analytics
BEDFORD, MA - September 5, 2017 - Nonfarm payrolls fell below expectations last month, adding a seasonally adjusted 156,000 jobs in August, well short of the 179,000 predicted in a Bloomberg poll of economists. Job gains for June and July were revised downward by 21,000 and 20,000 respectively, subtracting a net of 41,000 jobs in revisions. With these changes, the 2017 year-to-date average slipped to 176,000, a bit lower than the 2016 full year average of 187,000. Labor force participation, still low by historical standards, held steady at 62.9% in August. The unemployment rate ticked up to 4.4%, after hitting a 16-year low in July at 4.3%. While the labor market stumbled slightly in August, there were a few positive underlying trends in the jobs data such as a rebound in prime-age workers’ labor force participation which, at 81.6% in August, was up from a low of 80.5% in July 2015.
The private sector added 165,000 jobs in August, with the largest gains coming from professional and business services (+40,000), manufacturing (+36,000) and construction (+28,000). The composition of this month’s payroll gains bucked recent trends that showed the leisure & hospitality as well as education and health sectors as leaders in hiring. The jump in construction payrolls was led by specialty trade contractors (+15,400) and heavy and civil engineering (+6,600). Nonresidential building payrolls saw modest growth (+3,800) while residential building had a marginal increase (+1,500). The public sector lost 9,000 jobs in August with state governments decreasing the most (-5,000) while Federal and local employment fell marginally at (-1,000) and (-3,000) respectively.
Wage growth continues its consistent though unimpressive upward track, increasing 2.5% year on year. More robust salary growth remains elusive despite the headline 4.4% unemployment rate. The combination of large numbers of discouraged workers remaining on the sidelines and lower-paying industry sectors (like leisure and hospitality) leading job growth help to explain the inability of average hourly earnings to break out of the mid-2% range. Strong payroll increases in higher-salary categories (like manufacturing and construction) combined with continued job gains overall should help to accelerate wage growth over the coming year. This should keep the Fed’s plan to reduce their balance sheet on track and should encourage one more quarter-point (.25%) increase in the federal funds rate before the end of the year.
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Eric Becker | 104 West Partners | firstname.lastname@example.org
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