August Employment and Vehicle Sales

                              Payroll Survey Lays a Goose Egg, Auto Sales Parked

  • The August Payroll Employment Survey was unchanged from July; zero new jobs were added on net.
  • The separate Household Survey showed a sizeable gain of 331,000 jobs.
  • The Unemployment Rate held steady at 9.1 percent, reflecting the strong gain in the household survey.
  • Average hourly earnings dropped by 0.1 percent and the average workweek shrank to 34.2 hours.
  • Light Vehicle Sales for August dipped slightly to a 12.1 million unit annual pace.

There are two surveys that the Bureau of Labor Statistics conducts every month to determine job creation and the unemployment rate. The payroll survey determines employment by industry group. The household survey determines the unemployment rate. These surveys tend to show similar patterns over the medium term. In August these two surveys inhabited different planets. Payroll employment was unchanged in August; zero new jobs were created on net.  The headline number was held down by the loss of 47,300 telecom workers, due to the now resolved Verizon strike. Even without the whipsaw from the Verizon strike, this still would have been a very bad result. Most major industry groups showed signs of weakness in August. Manufacturing, which had been adding jobs, dropped by 3,000.  Construction was down 5,000. Retail trade fell 7,800. Professional and business services added an unimpressive 28,000. Higher education and health care added a lukewarm 34,000. Leisure and hospitality was up 2,000. The government sector, which benefitted from the resolution of the Minnesota state workers strike, still lost 17,000 jobs in August.  Worse yet, July payroll employment was revised down by 32,000 to a total of 85,000 jobs added for the month. However, the separate household survey, which determines the unemployment rate, showed a sizeable increase of 331,000 jobs in August, after declining by 38,000 jobs in July. This kept the unemployment rate steady at 9.1 percent.  Average hourly earnings dipped by 0.1 percent and the average workweek edged down by 0.1 to 34.2 hours. Weak earnings and a shorter workweek add up to constrained income growth in August.  All in all it was a negative employment report made perplexing by the disconnect between the languid payroll survey and the strong gains in the household survey.

Light vehicle sales dipped slightly in August to a 12.1 million unit annual rate. Given the collapse of consumer confidence in August and Hurricane Irene coming late in the month, this feels like a bullet dodged. Given the expectation of weak income gains in August, weak job growth in September and a hangover from the hurricane, auto sales may stay parked in September.

Market Reaction: U.S. equities opened with losses. Treasury yields are down at both ends of the yield curve. Oil is down to $86.10/barrel. The dollar is down against the yen and up versus the euro.

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