The Labor Department reported that the economy added 173,000 jobs in August, somewhat less than most predictions. However, the prior two months' numbers were revised upward by 44,000, bringing the average gain over the last three months to 221,000. The big job gainers in August were health care with 40,500 jobs, restaurants with a gain of 26,100 jobs and the government sector with an increase of 33,000. Almost all of the gains in government employment (31,700) were in state and local education. This reflects a timing issue with many schools starting earlier than normal. These jobs will likely disappear in next month's report.

The unemployment rate dropped to 5.1 percent, as employment increased by 196,000. However the employment-to-population ratio was little changed at 59.4 percent. Other news in the household survey was mixed. The percentage of unemployment due to people voluntarily quitting their jobs fell slightly from 10.2 percent to 9.8 percent. This is extraordinarily low given the relatively low rate of unemployment. All the duration measures of unemployment increased in August, with the share of long-term unemployed rising from 26.9 percent to 27.7 percent, the second consecutive increase.

The average hourly wage rose by 8 cents in August. It has risen at a 1.9 percent annual rate in the last three months compared with the prior three months, down slightly from its 2.2 percent rate over the last year. There clearly is no evidence of accelerating wage growth in this report.