United States: Non-farm payrolls make more modest gains in August
September 6, 2019
The labor market continues to be in good standing midway through the third quarter, however details of the August jobs report shows signs of weakening economic momentum. Non-farm payrolls increased 130,000 in August, down from July’s revised 159,000 rise (previously reported: +164,000) and notably undershooting market expectations of 163,000. Nevertheless, the three-month average payroll gains clocked in at 156,000 in August, which was above July’s print of 133,000 and comfortably above the 100,000 needed to absorb new entrants in the workforce.
Slower job creation in August was driven by weaker hiring activity in private service-providing sectors due to sharper losses in retail and slower job growth in education and health services. That said, payroll growth was partially boosted by a strong rise in government jobs, which was linked to the hiring of temporary workers for the undertaking of the 2020 Census. More positively, goods producing hiring activity rebounded in the month on robust construction payroll gains.
The unemployment rate held steady at 3.7% in August, which matched market expectations, while the labor force participation rate inched up from 63.0% to 63.2% in August. Meanwhile, earnings improved somewhat in the month, with hourly earnings increasing 0.4% month-on-month, up from 0.3% in July. However, annual wage growth edged down to 3.2% in August from 3.3% in July, which was in line with expectations.
Looking ahead to the Fed’s September FOMC meeting, the mixed August report does not necessarily strengthen the case for a rate cut. Explaining the Fed’s dilemma, James Knightley, ING chief economist, noted:
“Payrolls growth is slowing but wages are picking up, which underlines the difficult decision facing the Federal Reserve. The risks from a deteriorating international backdrop and a manufacturing recession mean we still look for September and December rate cuts.”
Author: Lindsey Ice, Economist