The Labor Department reported that U.S. employers added 169,000 jobs in August and the unemployment rate fell from 7.4 percent to 7.3 percent, however, the underlying details for both data points were far more negative than the data itself.
Once again, job growth was concentrated in low paying retail trade and food service sectors and there were large downward revisions to prior data. As for the falling jobless rate, it was due entirely to workers leaving the labor force and no longer being counted as “unemployed” as the labor force participation rate fell to 63.2 percent, its lowest level since 1978.
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The August payroll gains were slightly less than the consensus estimate of 180,000, but the more important payrolls data came via downward revisions to prior data. The June job creation total that was originally reported at 195,000 was lowered to 188,000 last month and ended up at 172,000 in today’s report while payroll growth in July was revised from 162,000 to 104,000, all of which makes the recent trend decidedly down.
The declining jobless rate was driven by an exodus of 312,000 people from the labor force as 115,000 fewer people had jobs and 198,000 more people were counted as “unemployed” All told, some 516,000 more people were counted as “not in the labor force” as the labor force participation reached a new recovery low.
The broader U-6 measure of “underemployment” that includes discouraged workers and those settling for part-time work fell from 14.0 percent to 13.7 percent.
Returning to the establishment survey, job creation was in all the usual places as the trade, transportation, and utilities group added 64,000 workers, some 44,000 coming in retail trade with many of these being part-time positions at clothing stores (+13,700) and grocery stores (+11,700).
Restaurants and bars accounted for 21,200 of the 27,000 new jobs in the leisure and hospitality sector and the health care industry accounted for 38,300 of the 43,000 new jobs in education and health care services.
Temporary positions were responsible for more than half of the 23,000 increase in new professional and business services jobs while more than 20,000 new education workers were hired by local governments, more than offsetting a decline of 4,000 elsewhere in payrolls at all other levels of government.
Overall, this was a very disappointing labor report due to the underlying details, however, the jobless rate did fall and this remains the key data point for the Federal Reserve as they contemplate dialing back their money printing effort later this month.
Source: Iacono Research
