Just 173,000 jobs were added to the U.S. economy in August, according to the latest release from the Bureau of Labor Statistics out Friday morning. That’s well below market expectations as well as the 12-month average. However, with the unemployment rate coming in at its lowest level since April 2008, seemingly for the right reasons, and solid revisions to prior months’ payroll count the situation may not be as lackluster as the August figure suggests.
The count for June was revised up to plus 245,000 from the latest reading of plus 231,000 jobs. July’s figure was also revised up to plus 245,000 from an initial reading of 215,000. Net total employment gains in June and July were therefore 44,000 higher than BLS previously reported and in line with the 12-month average of 247,000 monthly jobs added.
“Look past the August payroll number at the upward revisions in June and July to get a true sense of this report,” advises Greg McBride, chief financial analyst at financial data site Bankrate.com.
PNC Chief Economist Stuart Hoffman wrote in a note, “The August preliminary payroll jobs number is notorious for understating the final revised data by a huge average of 78,000 jobs in the past three years so there will be upward revisions to the 173,000 gain in the next two months.”
The sectors that added the most jobs were: health care and social assistance (56,000), professional and business services (33,000) and food services and drinking place (26,000). Conversely, manufacturing and mining lost jobs (17,000 and 9,000 respectively).
At 5.1% the unemployment rate, which is drawn from a different survey, was down from 5.3% in June and July. Up for debate, however, is whether people are leaving by choice or because they have determined opportunities do not exist for them.
Currently 8 million Americans are unemployed, down 1.5 million year-over-year, about half of the reduction from the long term unemployed. In August there were 624,000 discouraged workers — i.e. people not currently looking for work because they don’t believe jobs are available for them and therefore are not considered unemployed — which is down by 151,000 from a year ago and down by more than 40,000 from last month.
The labor force participation rate was also steady at 62.6% for the third month in a row, remaining at its lowest level in almost four decades. Previously the rate has been remained in a narrow 62.7% to 62.9% range. The U-6 rate, which measures under-employment, came in at 10.3% in August versus 10.4% in July and down from 12% a year earlier. The employment-population ratio was little changed at 59.4%.
Average hourly earnings rose by 8 cents to $25.09 last month. The 12-month wage growth rate is therefore 2.2%. Pre-recession normal year-over-year wage gains were between 3% and 4%.
McBride points to the steady participation rate and employment population ration combined with the revisions to conclude the unemployment rate is lower because more people are getting back to work.
“We have been saying for months that we want to see more people coming back into the labor market, but at this point it looks like they may stay on the sidelines,” notes Tara Sinclair, chief economist at job search site Indeed. ”If this is the new normal we need to start getting comfortable with it.”
Equity markets futures were in the red Friday, with the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all down about 1% in the first 20 minutes following the release. The question on investors’ minds is what this all means for the Federal Reserve, which has indicated it would like to nudge interest rates from near zero if economic conditions allow.
“There is nothing in there that would deter the Fed from raising rates this month. The decision is ultimately going to come to what shape financial markets are in mid September,” says McBride. Markets have been suffering a bout of drama in recent weeks the Vix volatility index soaring and the Dow declining close to 9% for the year. “The Fed wants to raise rates or at least get the process started. They need to restock the cupboard in order to having something to serve up” next time the economy gets into trouble.
“With the unemployment rate falling to within the range the Fed has said is consistent with full employment, and labor force participation showing no sign of picking up, it may finally be time for the Fed to call this economic recovery stable and raise rates,” says Sinclair. “Wages are rising, and inflation is nowhere to be seen, so although we would hope for stronger numbers there is an argument for a September rate hike.”
This article was written by Samantha Sharf from Forbes and was legally licensed through the NewsCred publisher network. Talent HQ is a premier information channel empowering professional development for recruiting and HR communities through regional events including Minnesota Recruiters, Wisconsin Recruiters, Florida Recruiters and California Recruiters.