August Jobs Report Nothing To Write Home About
The August Jobs Report was positive, but weak, calling into question the Federal Reserve's apparent plan to raise interest rates this month.
August’s Jobs Report paints a picture of an economy that is growing, but growing rather slowly, and once again calls into question the Federal Reserve’s apparent plan to begin raising interest rates in September:
Total nonfarm payroll employment increased by 173,000 in August, and the unemployment rate edged down to 5.1 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care and social assistance and in financial activities. Manufacturing and mining lost jobs.
In August, the unemployment rate edged down to 5.1 percent, and the number of unemployed persons edged down to 8.0 million. Over the year, the unemployment rate and the number of unemployed persons were down by 1.0 percentage point and 1.5 million, respectively. (See table A-1.)
Among the major worker groups, the unemployment rate for whites declined to 4.4 percent in August. The rates for adult men (4.7 percent), adult women (4.7 percent), teenagers (16.9 percent), blacks (9.5 percent), Asians (3.5 percent), and Hispanics (6.6 percent) showed little change in August.
(See tables A-1, A-2, and A-3.)(…)
Total nonfarm payroll employment rose by 173,000 in August. Over the prior 12 months, employment growth had averaged 247,000 per month. In August, job gains occurred in health care and social assistance and in financial activities. Employment in manufacturing and mining declined. (See
table B-1.)Health care and social assistance added 56,000 jobs in August. Health care employment increased by 41,000 over the month, with job growth occurring in ambulatory health care services (+21,000) and hospitals (+16,000). Employment rose by 16,000 in social assistance, which includes child day care services and services for the elderly and disabled. Over the year, employment has risen by 457,000 in health care and by 107,000 in social assistance.
In August, financial activities employment increased by 19,000, with job gains in real estate (+8,000) and in securities, commodity contracts, and
investments (+5,000). Over the year, employment in financial activities has grown by 170,000.Employment in professional and business services continued to trend up in August (+33,000) and has increased by 641,000 over the year.
Employment in food services and drinking places continued on an upward trend in August (+26,000), in line with its average monthly gain of 31,000 over the prior 12 months.
Manufacturing employment decreased by 17,000 in August, after changing little in July (+12,000). Job losses occurred in a number of component industries, including fabricated metal products and food manufacturing (-7,000 each). These losses more than offset gains in motor vehicles and parts (+6,000) and in miscellaneous durable goods manufacturing (+4,000). Thus far this year, overall employment in manufacturing has shown little net change.
Employment in mining fell in August (-9,000), with losses concentrated in support activities for mining (-7,000). Since reaching a peak in December 2014, mining employment has declined by 90,000.
Employment in other major industries, including construction, wholesale trade, retail trade, transportation and warehousing, and government, showed little change over the month.
The figures for June and July were revised upward to show a total of 245,000 jobs created each months, a total upward revision of 44,000 net jobs over the two months. Including the figures for August, that means that job gains have averaged 221,000 per month over the summer, a respectable number but hardly a sign of a robust and growing economy. One good sign can be found in the work week and hourly wage figures, both of which increased during the month of August after having been mostly stagnant for the better part of 2015, hovering around an annualized growth rate of around two percent. Whether this is the start of a trend or a an anomaly remains to be seen, however, especially since there are other signs that businesses remain cautious when it comes to new spending and investment. , so it’s better Long term unemployment remains unchanged as it has all summer, and is still above ten percent, although it is worth noting that it is below where it was a year ago, when it was still stuck at twelve percent. Finally, the labor force participation rate remains at levels unseen since the Carter Administration.
Heading into the announcement of today’s report, analysts were expecting net job growth somewhere in the range of 220,000 new jobs, so these figures are obviously disappointing in one respect. In another, though, they are likely to be viewed positively on Wall Street. For the past several months, the Federal Reserve has been hinting that it would be raising interest rates in the near future. The most recent statements from the Fed have indicated that we’d likely see a rise sometime this month, albeit a very small one. Given the fact that interest rates have been effectively near zero, after adjusting for inflation, for years now, it’s inevitable that we’ll see an interest rate increase at some point. Many observers have expressed concern about the Fed’s seeming determination to raise rates at a time when there are no real signs of inflation in the economy, and when there are still signs of underlying weakness that could slow economic growth quickly, or even send the nation over the edge into recession. Additionally, Wall Street traders and investors have gotten somewhat used to a low-interest rate environment and even a slight rise in rates is likely to have an impact on trading. While that alone shouldn’t stop of the Fed from raising rates if it believes it to be necessary, there would also be an undeniable economic impact from a market downturn, not the least them being the impact on the retirement savings of millions of Americans.
Because of all that, every economic data point released recently has been examined from the perspective of what impact it might have on the Federal Reserve’s interest rate decisions. As The New York Times notes, today’s report is yet another data point that analysts and traders will be using to try to anticipate what the Federal Reserve will do in the coming weeks and months:
Federal Reserve officials have repeatedly signaled they plan to soon raise interest rates from near zero, where they have been since the depths of financial crisis in late 2008.
But the exact timing of the decision has become an obsession for traders and investors on Wall Street, and something of a parlor game for economists and other armchair strategists, albeit one with billions of dollars at stake.
While the initial rate increase will be small — probably a quarter of a percentage point — it looms large psychologically for the markets because it will be the first increase in short-term rates by the Fed since June 2006.
Many Wall Streeters credit historically low interest rates and loose monetary policy for helping lift stock prices to near highs, triggering fears that the inevitable tightening could put an end to the long post-recession bull market.
Some experts have been predicting a rate increase when the Fed meets in two weeks.
But another school of thought contends the Fed will wait until its last gathering of the year, in December, especially in light of the recent stock market sell-offs on bourses around the world.
Officials said at the last Fed meeting, in July, that they wanted to see “some further improvement” in labor markets. Stanley Fischer, the Fed’s vice chairman, said Saturday that the Fed was awaiting the results of the August survey to make that judgment.
Inflation remains sluggish, and a number of officials have expressed concern about the volatility of financial markets. They have said the central bank is unlikely to move until it can judge the reasons for the turmoil and assess the damage.
Eric Rosengren, president of the Federal Reserve Bank of Boston, said Tuesday that signs of a weaker global economy raised new doubts about the Fed’s expectation that domestic job growth would continue to be fast enough to drive up inflation.
“In my view, these developments might suggest a downward revision in the forecast that is large enough to raise concerns about whether further tightening of labor markets is likely,” Mr. Rosengren said.
Given the fact that we’ve seen job growth above 200,000 per month for most of the year, these July numbers are obviously disappointing. Even if they are revised upward, they are still likely to end up somewhere below what we’ve been seeing for most of 2015. Whether that ends up being a blip or not is something only time can tell, but it does suggest that there’s at least some underlying weakness in the economy. Additionally, it’s still unclear what economic impact we’ll see from the instability in China and the fluctuations in worldwide stock markets that has resulted from that. At least in the short term, traders seem to be anticipating slower long term growth worldwide, a fact that is perhaps best demonstrated by the decline in oil prices, which is largely attributable to anticipated lower demand from China and elsewhere in the wake of an economic slowdown. Given that, it remains unclear whether even a small rise in interest rates is worth risking now.
The days of rapid job growth are over for good. Between outsourcing and industrial robots the economy really doesn’t need US workers anymore. My local grocery store has eliminated checker jobs with scan it yourself checkout stands. When I call a customer service number I get someone with an obvious Indian accent and I often have a hard time even understanding them. The Chinese economy is tanking because there are not enough people who can afford to buy the stuff they produce. The price of oil has declined because fewer and fewer people can afford gasoline. The price of food is on the increase all over the world because of climate change induced drought. I see the price of lettuce has doubled in the last year.
Every single statement you make here is wrong. besides not being able to understand Indian customer service workers: job creation was rather fast in the last 3 years or so, Chinese economy is not cratering because of lack of demand for its products, the decline in the price of oil is all about supply, not demand. ”
Even the last bit about food is wrong: despite the drought and real possibility of food shortages in the future, the price inflation of food is flat.
No offense, but that screed sounds like it came from Tyrell, not a usually very perceptive commenter.
Keep in mind that in order to bring the people who lost their jobs during the recession back to work at least 225,000 new jobs need to be created every single month over a period of years. Those people aren’t even counted in the unemployment figures any more–they’ve stopped looking and their long period of unemployment will make them all but unemployable in anything but the tightest of labor markets.
You’re both wrong and so is Doug. Now it’s my turn.
Job growth peaks at ~260k/month. There is no such thing as a “good jobs report”. It’s either “ok”, “mediocre”, or “terrible”. Want proof? Just look at the last 30 years. We peak out at around 260k, even in the unsustainable .com boom era.. The key is to sustain as much as possible and avoid the catastrophic disasters of the Bush 1 and 2 eras..
I told you so.
The mainstream media is now validating a point I’ve argued here and at Dave Schuler’s place in the past: the young ‘uns are just less interested in things than we were, especially that largest and most expensive of all things,the car:
I don’t have time to go look up the 20 or 30 times I said it, but status has changed and is no longer about the acquisition of things. That inevitably will take a toll on the economy – if status is 1000 Twitter followers (cost: some small portion of a $600 cellphone) and not a car (cost: $20-30,000 plus insurance, plus gas, plus carwash, plus repairs) you’re going to see less demand.
The coming generation is simply not as materialistic as we were. They just do not want all the stuff. No big house, no big car, and if they don’t want a big house or a big car, well, that’s a rather massive chunk of money they don’t require.
The zeitgeist is changing. If you diminish acquisitiveness, add robots, apps and off-shoring, I’d argue it’s time to seriously re-think what we mean by normal or desirable.
@michael reynolds:
I’m not so sure that there’s less materialism. I would say that the fancy car/big house dream is not as powerful as other materialistic dreams that are not as debt-driven.
The other thing to keep in mind is how sociopathic a statement like Schuler’s above sounds. Their long period of unemployment will make them all but unemployable in anything but the tightest of labor markets. This is American capitalism at its cruelest and dumbest: calling someone unemployable simply because they had the misfortune to be laid off and then going along with the logic of it all in order to keep the magic going.
It’s the kind of thinking that the sad and insecure do in order to prove that they are ruthless and can compete. Young people, I think, see the sadness and emptiness 24/7 in the world and very little else.
@Modulo Myself:
If you think that businesses are going out of their way to hire the long-term unemployed, I welcome your evidence.
@Dave Schuler:
I don’t think they are. I just happen to think it’s ludicrous that long-term unemployment is a stigma, given that all of us have (in theory) the cognitive ability to grasp that losing one’s job is not evidence of anything. Either businesses must believe that the long-term unemployed are inferior employees, or they are filled with people who are terrified that someone who has not had a job in a year is a magical ‘loser’ and thus, regardless of actual merit, not worth hiring. Personally, I suspect that employers take pleasure in the intentional cruelty of it all, especially since their employees will absorb the message that anything is better than being unemployed.
@michael reynolds: Cars: around here they remain a huge item. High school students see them as a symbol of freedom. The vehicles of student choice are trucks, Civics, Scions, and muscle cars (Mustangs, Camaros, Challengers: cars with engines producing a bone rattling 600 horsepower). A local dragstrip is the hotspot on Saturdays, with the street division wildly popular: a safe outlet for the local lead foots. A fast food restaurant and drive in restaurant are the local weekend hotspots, with people cruisin’ their tricked up cars, the rumbling sound of custom mufflers in the air. The talk is of cams, carburetor settings, and transmission ratios.
No, there is no shortage of interest in cars here.
@michael reynolds: Ehhh. I agree we might be on the precipice of that kind of change, but I’m queasy about making that sort of prediction. Maybe if self-driving cars take off, but that’s going to require banning human driving and there’s no way that’s going to go down easy.
@Modulo Myself: I’ve been reading up on the Great Depression these last few months. Presently I’m into Rob’t McElvaine’s book. I find every history that addresses the psychology of the time is an account of how people at the time tended to blame themselves for their joblessness. It came on the heels of the prosperity of the ’20s in which Spencerian ‘social darwinism’ made the newly rich American middle class feel like their virtues had brought them wealth. They sank into a kind of lethargy and — well — depression that was only broken (and only partially broken) by the ebullient attitude of FDR and the can-do affect of the NewDealers. Later in the period, say ’34 & ’35, the leftist/marxist critique of capitalism gained some ground and various populists (Huey Long, Fr Coughlin) brought people to their feet.
@JohnMcC:
I don’t know where I read this or how trustworthy it is, but I think somewhere late in FDR’s first term, business became very concerned that the consumerism that really came into being in the 20s (which was kind of the creation of Freud’s nephew, Edward Bernays) would vanish due to the New Deal. Work would become based on actual utility and play, rather than as a means to acquire money in order to live through consumption. This was impetus behind the 1939 World’s Fair, allegedly.
@michael reynolds:
As the father of two female Millenial college graduates, I can tell you that I’m observing what you are. One lives in the city and she rides a Vespa or takes public transit, the other lives in a city and she rides a bike or takes public transportation. I suspect that if they lived in the suburbs that might change, however, neither of them (nor their friends) are busy binge shopping and acquiring lots of stuff. They’re spending their money on travel, on day to day items.
I probably won’t be around to see this new world, but If I had to place a bet, I’d put my money on less materialism than prior generations.
@michael reynolds:
It’s not that they don’t want things, it’s that they want different things. The students coming into my classes every year are all interested in things, just as my classmates were a couple decades ago were interested in things. We still live in a very materialistic society. The kids I see over the course of 4-5 years manage to go through at least 2 if not 3 or 4 $600+ cell phones in that time. Most of them tend to also have tablets and laptops and fashionable clothes. There’s definitely a lot a find admirable about them, but eschewing materialism isn’t on that list.
@Tyrell:
You really do live in a different decade don’t you.
@al-Ameda:
It would be nice if you and MR are right, but I’m not seeing materialism fading away quite so quickly as you two seem to. I see it being directed differently. Now that I’m thinking about it a bit more, I think what I more mean is that I don’t see consumerism fading. The things being bought and signalling status are smaller and/or more transitory, but they are still being bought and still signalling status. But, here’s to hoping you are both right and I’m just being cynical.
I am not seeing any decline in materialism among young people. I am seeing them with cell phones that cost more than a nice computer. Many consider $80 fo a pair of shoes as cheap. They think nothing of buying (actually their parents paying) $60 hooded sweatshirts that have a certain logo on them. They shop at the popular stores, not just department stores. They are just as popular name brand consumers as any generation. I am sure when they get out on their own (around age 36) their “tastes” will be different.
Just to put Doug’s meh analysis in perspective, unemployment fell to 5.1 per cent. Unemployment in the seventh year of Saint Ronaldus Maximus, who presided over the greatest recovery in human history, according to Republicans? 5.9 per cent in September 1987. In December 1988, at the end of Ronaldus’ term? 5.3 per cent.
Now, conservatives have been busy telling us that what we should be concerned about is not the unemployment rate, ( because Obama is looking kind of good on that) but the labor participation rate. Regardless of which rate you look at, the current recovery looks as good as previous recoveries, if you actually compare the statistics rather than imagine how wonderful previous recoveries were.
@Tillman:
Paul Krugman describes as “humbug” the idea that this recession is particularly different from earlier recessions. He took a look at the data, and concludes:
What does all this mean? It’s that the conventional wisdom that this recession is different, that the problem is structural, and that some great cultural change has happened as the result of the Great Recession is all probably wrong. A slow, halting recovery after a great financial collapse isn’t a new thing-it’s the standard result. It was that way in the 1930s and again in the 1980s. We just remember it differently-helped by right wing deification of Reagan and the fact that people who remember the Great Depression are dead or soon to be.
That said, I wouldn’t be surprised people whose formative years were 2001-2015 are going to be thriftier and more cautious than people who grew up 1985-2000.
LINK:http://krugman.blogs.nytimes.com/2013/08/03/structural-humbug/
@CrustyDem: That only makes it look worse as population has grown significantly. A lower rate of job creation with a larger workforce means increasingly sub-optimal performance; exactly the scenario Keynes described in The General Theory by the way.
@stonetools:
Yeah, it sorta is. Again, I recommend House of Debt as a good data-driven discussion of what is different this time. (Hint: the title of the blog and book.)
This recovery is more like the Great Depression than it is like any other recession since then, despite our much better grasp of fiscal policy these days. That’s not an indictment of this administration’s policies; it’s an indictment of the kind of hole we dug prior to that.