Quirky August Jobs Report Shows July Clunker, Unemployment Rate Falls to 7.3 Percent
- The August Payroll Employment Survey showed a weaker-than-expected gain of 169,000 jobs.
- The Unemployment Rate for August decreased to 7.3 percent.
- Average Weekly Hours ticked up for the month to 34.5. Hourly earnings gained 5 cents.
Quirky August labor data should not prevent the Federal Open Market Committee from voting to dial down QE3 on September 18. Fed officials remain noncommittal, so a September 18th announcement of the beginning of the end of QE3 is still likely, but is by no means assured. August payroll employment increased by a less-than-expected 169,000 jobs. July payroll gains were revised down to a weak 104,000 and June was revised down to 172,000. Together, the three months averaged a gain of 148,000 jobs per month, a step below the previous three-month average of 172,000. Some of the dip in summertime job creation can be attributed to the auto industry, which had larger-than-expected temporary furloughs for summer retooling. The good news there is that August auto sales were strong, at a 16.1 million unit rate, and automakers will increase production this fall to meet rising demand.
The household measure of employment, which feeds into the unemployment rate, showed a decrease of 115,000 jobs in August after a strong 227,000 job gain in July. The labor force decreased for the second month in a row. In August it was down 312,000. The outsized decline in the labor force brought the unemployment rate down to 7.3 percent for the month. It also brought the labor force participation rate down to 63.2 percent, the lowest it has been since August 1978. The drop in labor force participation reinforces the view that the drop in the unemployment rate belies the large amount of slack in many segments of the labor market.
Construction added no jobs in August, consistent with the plateau in residential construction activity, and reported shortages of construction workers. Manufacturing employment was up by 14,000 workers, concentrated in the auto sector. Retail trade added 44,000 jobs in August. Information industries shed 18,200 jobs, concentrated in the motion picture industry. Financial services dropped 5,000 jobs. Business and professional services gained 23,000 jobs in August, with temporary help services up 13,100. Education and healthcare added a solid 43,000 jobs. Leisure and hospitality gained 27,000 positions. The government sector added 17,000 jobs, reflecting earlier starts to the school year for public school teachers.
Market Reaction: U.S. equity markets opened higher. Treasury bond yields are down. NYMEX crude is up to $109.94/barrel. The dollar is down versus the yen and up against the euro.
For a PDF version of this Comerica Economic Alert, click here: Employment 090613.