The US jobs print has been firmer than expected, changing the tone of the policy debate. By adding 162,000 positions and keeping unemployment at 4.1%, employers have put to rest any notion of a summer lull. That affords the Fed greater latitude to put inflation first as its September 15-16 gathering nears.
Why this jobs beat matters for rates
Policymakers can turn their attention to price pressures without worrying about inflicting harm on the labour market, given the steady 4.1% unemployment and solid hiring. The Bureau of Labour Statistics put out the report ahead of the Fed’s decision on the 16th for good reason.
Then again, the numbers alone will not end the rate discussion. One gets the sense from officials that what comes in on inflation will be the deciding factor. Still, the momentum from August takes away the chance that a second weak month would have compelled a defensive move to back growth.
Where hiring accelerated, and where it stalled
Public and consumer-facing services drove the increases. Food and drinking establishments put on 59,000 jobs, well in excess of the 12,000 they have been putting up on a monthly basis over the last twelve months. In local government education there was an addition of 42,000, making up for a drop the month before.
Industry played its part too. Manufacturing was up 16,000 and construction 22,000, even if the latter has been otherwise flat. Health care was a relative underachiever at 13,000 against an annual average of 32,000.
Services outpace tech
It is an uneven recovery. The information industry shed 23,000 workers, in line with the 8,000 in losses it has averaged over the past year. You see little movement in retail, financial or professional services, or in transportation and warehousing.
There is a clear rotation here: demand for services holds up while technology firms are still cutting back. It is a mix that adds to payrolls but presents headwinds of a kind that jobseekers and investors need to take into account.
Revisions reshape the summer narrative
The headline was not the only thing to surprise. Revisions have added 55,000 to the June and July totals. What was reported as a 23,000 loss in July is now a 21,000 gain; June has moved from 20,000 to 31,000. Much of the alarm from earlier in the summer is gone.
In context, reality has diverged from what was expected. Economists were looking for something in the order of 53,000 for August. At 162,000 it is a marked departure from the 31,000 average of the previous year.
Labour supply, hours and pay signal gradual healing
One sees a slight nudge upwards in the labour supply.
At 61.6%, the labour force participation rate has inched up, as has the employment-population ratio which is holding at 59.1%. The unemployment rate remains at 4.1% with some 7 million out of work, a figure not much different from July’s.
There are signs of slack easing at the margins. The ranks of those on part-time for economic reasons have dropped by 414,000 to 4.4 million. Yet 5.7 million who are not in the labour force still want a job; among them are 1.7 million marginally attached, including 441,000 discouraged workers of the opinion that nothing is available to them.
The numbers present a mixed picture when one looks at duration and demographics. Some 27 per cent of the unemployed, or 1.9 million, have been so for 27 weeks or more. While Asian worker unemployment has come down to 3.2% and teen figures ticked to 14.1%, rates for adult men and women as well as White, Black and Hispanic workers were largely flat.
Wages are on the rise but not in a way that is reshaping the inflation outlook. In August, average hourly earnings for private nonfarm employees went up 10 cents to $37.75, a 0.3% or 3.1% annual increase. For production and nonsupervisory staff the gain was 11 cents, to $32.53. Work hours have also crept up, an indication of demand: the average week for all private nonfarm employees is now 34.4 hours, and 40.5 for those in manufacturing.
What investors should be watching
The Fed will go into its September 15-16 meeting with a labour market that appears resilient if in the process of rebalancing. Given steady unemployment and hiring that has outpaced forecasts, officials have the room to take a hard look at inflation before any policy change. All eyes will be on whether the central bank makes a more forceful stand against inflation.
Key strategic signals from the report for markets and businesses include:
– Hiring strength affords the Fed flexibility
– Services are making up for tech’s job cuts
– Revisions put to rest any summer slump concerns
– Firm wage gains without being inflationary
– Hours worked are a sign of steady demand
Competitive dynamics across sectors
The data shows employers where the competition for labour is most acute. Steady consumer spending has restaurants and bars ahead of the pack, and public education has made a recovery after some seasonal distortions. In manufacturing, the steady run of new hires speaks to demand for goods.
On the other hand, retrenchment in the information sector is having a loosening effect on tech-adjacent hiring. You see firms in retail, finance and logistics treading water, which points to a more targeted approach to expansion than a broad one.
The bottom line
With June and July revised higher by 55,000 in total, the 162,000 jobs added in August and the 4.1% unemployment rate put to rest the shaky narrative of the summer. The labour market is sturdier than the headlines would have you believe. What happens next is a matter of inflation, but the jobs data has given the Fed options.
