Friday, September 7, 2018

Popular Economics Weekly


Total nonfarm payroll employment increased by 201,000 in August, and the unemployment rate was unchanged at 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, wholesale trade, transportation and warehousing, and mining.

Very little happened with the August Unemployment report. Average hourly wages rose slightly, and more service sector jobs were created, but fewer new jobs were created in the more highly-skilled manufacturing and high tech sectors.

White-collar professional firms filled 53,000 positions, bringing the total created over the past 12 months to more than half a million, which includes both the professional and business services, and health care. These are the fastest growing jobs in the country. Health-care providers hired 33,000 people, transport firms added 20,000 jobs and construction companies hired 23,000 workers.

Employment fell by 3,000 in manufacturing, the first decline in 13 months. U.S. tariffs and a scarcity of (higher paid) skilled laborers may finally being felt by employers. And gains for July and June were revised down by a combined 50,000, the Labor Department said Friday.

This could be a sign that economic activity is peaking, although wholesale trade, transportation and warehousing job growth was robust.

The (other) Household Survey that actually measures the unemployment rate—a smaller telephone survey of households that is slightly less accurate—held steady at 3.9 percent though the labor participation rate slipped 2 tenths to 62.7 percent.

This was because the number of people in the labor force went down by a half of million, to 161.8 million from 162.3 million reflecting a decrease in the number of employed which in this survey, in contrast to the BLS Establishment survey, includes the self-employed.

The big news was the 2.9 percent rise in average hourly earnings, the highest since December 2007 and the beginning of the Great Recession, according to Econoday.

The Labor Department also reported the number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.4 million, changed little over the month but down by 830,000 over the year. “These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs,” said Labor.

The fall in part-time employment tells us why wages are finally rising above the inflation rate—most have found full-time work. This may cause the inflation rate to rise, since workers’ salaries are about two-thirds of product costs. Inflation is still tame, however, with the Fed’s preferred ‘core’ PCE inflation index holding at 2 percent. We believe the Fed will raise short term interest rates by another 1/8 percent at its next FOMC meeting, anyway, in spite of President Trump’s tendency to berate Fed Governors in an effort to hold interest rates down; because higher interest rates make imported goods more expensive for consumers.

Inflation, in other words, is only this low because of the slow rise in hourly wages. It means a majority of new jobs being created are either in those warehousing and transportation sectors, or leisure services that still pay barely subsistence wages.

There was nothing else of note in the August jobs report. Consumers seem to be happy, with consumer confidence and retail spending at their highest levels in years, which should mean continued high GDP growth for the rest of this year.

That’s because neither consumers nor investors seem to be taking rising import and export prices from the new tariffs very seriously, yet.

Harlan Green © 2018

Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen

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