August Payrolls Below Expectations, Up by 156,000
- Payroll Employment increased by 156,000 jobs in August.
- The Unemployment Rate for August notched up to 4.4 percent.
- The ISM Manufacturing Index for August increased to a strong 58.8 percent.
- Construction Spending in July dipped by 0.6 percent.
The payroll jobs data for August fell below expectations, with 156,000 net new jobs created. In addition to the miss on August payrolls, June and July payrolls were adjusted down by 41,000 jobs. There is no drag from Hurricane Harvey in the August employment data since it was collected well before the storm struck. The +156,000 payroll gain is not a bad number at all, but it does take the shine off glowing labor reports from June and July. The August household survey was even weaker than the payroll survey. Employment by household fell by 74,000 for the month. The labor force also showed a weaker than expected gain for the month, of just 77,000. These two series combined to push the unemployment rate back up to 4.4 percent in August. The unemployment rate has now been in the 4.3-4.4 percent range since April. Average hourly earnings increased by 0.1 percent in August. This is still below what the low unemployment rate would suggest. The average workweek ticked down by a tenth to 34.4 hours. August is often a quirky month for labor data, but we have to assume that the BLS got the seasonal adjustment factors correct. Even though the August jobs data was underwhelming, we expect the Federal Reserve to stay with the widely anticipated schedule of announcing the beginning of balance sheet roll-off at the conclusion of the upcoming September 19/20 FOMC meeting. Spiking gasoline prices and trucking rates dues to Hurricane Harvey will not show up in the August inflation data, but they will show up in the September data, released in October.
The establishment data show that 6,000 jobs were created in mining and logging industries. A strong 28,000 construction jobs were added on net. Manufacturing was up strongly, adding 36,000 jobs for the month. Retail trade was weak, adding just 800 jobs in August. Transportation and warehousing employment increased by 1,900. Information services gave up 8,000 jobs. Financial services gained 10,000 jobs in August. Professional/business services added 40,000 employees. Education/healthcare was up 25,000. Leisure and hospitality missed, gaining only 4,000 workers for the month. Government employment declined by 9,000 jobs.
The August ISM Manufacturing index increased from 56.3 in July to a strong 58.8 percent, showing improving conditions for U.S. manufacturers. Disruptions due to Hurricane Harvey may show up in production, inventory and price data for some industries in September.
Total construction spending in July decreased by 0.6 percent. Private residential construction gained 0.8 percent, supported by single-family housing projects. Private non-res construction spending dipped by 1.9 percent with declines in commercial, educational and religious projects. Public construction eased by 1.4 percent in July.
Market Reaction: U.S. equity markets opened with gains. The 10-Year T-bond yield is up to 2.15 percent. NYMEX crude oil is up to $47.26/barrel. Natural gas futures are up to $3.08/mmbtu.
For a PDF version of this Comerica Economic Alert click here: Employment_09012017.