United States: Payroll growth disappoints in August, unemployment rate inches back up
September 1, 2017
The U.S. labor market failed to meet expectations in August as payroll growth disappointed, the unemployment rate rose from its 16-year low in July and wage growth failed to gather momentum. Non-farm payrolls increased 156,000 in August, coming in below market projections of 180,000 new jobs. The previous two months were also revised down a combined 41,000 jobs, with June and July hiring reduced to 210,000 and 189,000, respectively.
Despite the undeniably negative headline figure, the underlying details in the August report are positive. Job growth was once again spearheaded by the private sector, which added 165,000 jobs in the month. Hiring in the private sector was led by professional and business services (+40,000) and healthcare and education (+25,000), while manufacturing payrolls soared as 36,000 new jobs were added and revisions to the previous two months were made for a total of 19,000 additional jobs. The goods-producing sectors tend to be a better gauge of the underlying momentum, which makes the employment growth in the manufacturing sector a particularly upbeat figure.
In the household survey, the unemployment rate inched up from a 16-year low of 4.3% in July to 4.4% in August, around where it has been hovering since April. The labor force participation rate in August was, however, unchanged from July’s 62.9%.
The report’s bleakest outturn was that of average hourly earnings, which failed once again to increase significantly despite the overall strength of the labor market. Hourly gains were up 2.5% on a year-on-year basis in August, mirroring the figure seen in the previous month. The lack of traction in wage growth will continue to provide the doves in the Federal Reserve with arguments to delay the start of the balance-sheet unwinding and continue on the current path of interest rate normalization.
Author: David Ampudia, Economist