September 01, 2023
The August jobs report gave a somewhat mixed picture. The unemployment rate rose from 3.5 percent in July to 3.8 percent in August. This large of a jump would ordinarily be serious grounds for concern, but it was driven by an extraordinary 736,000 one-month rise in the size of the labor force. Employment in the household survey actually rose by 222,000. It is now up by more than 2.8 million over the last year.
The establishment survey showed a gain of 187,000, but the prior two months’ gains were revised down by 110,000. This brings the three-month average to 150,000. This may still be a somewhat faster rate of job growth than can be sustained over the long term. It is certainly not a pace that is consistent with rising unemployment.
Index of Aggregate Hours Rises 0.4 Percent in August After Falling 0.2 Percent in July
There was a modest rise in the length of the average workweek, which led to a 0.4 percent rise in the index of aggregate weekly hours for the month. However, much of this gain was simply reversing a 0.2 percent drop in July. Hours growth has been considerably weaker than job growth over the course of 2023, with the index of aggregate hours increasing just 0.3 percent since January. With the most recent data indicating that the third quarter will have strong GDP growth, the slow growth in hours implies a very good productivity picture.
Wage Growth Slows Modestly
The pace of growth slowed modestly in August, with the average hourly wage rising just 0.2 percent in the month. This puts the annualized rate over the last three months at 4.5 percent, down from a 4.9 percent rate in the three months ending in July and only slightly higher than the 4.3 percent over the last year.
Big Jump in Labor Force Participation and Unemployment for White Teens
The labor force participation rate (LFPR) for white teens rose by 1.8 percentage points from 37.8 percent to 39.6 percent. This corresponded to an increase of 233k in the teen workforce, an extraordinary one-month rise of 4.9 percent. It also led to a 1.4 percentage point rise in the unemployment rate for white teens to 10.9 percent. This is likely at least partly an issue of seasonal adjustment. (The unemployment rate for Black teens fell by 3.8 percentage points to 16.9 percent.)
Employment of Foreign Born Up 1.74 Million Over Last Year
The unemployment rate for foreign-born workers stood at 3.7 percent in August compared to a 4.0 percent rate for native-born workers. Foreign-born workers accounted for over 60 percent of the employment growth over the last year.
Employment Rate for People with a Disability Hits New High
The employment rate for people reporting a disability rose to 23.0 percent in August, the highest on record. This is up by 2.2 percentage points from the employment rate last August.
Health Care Adds 70.9k, Almost 40 Percent of Private Sector Gains in August
The August gains followed increases of 61.9k and 73.0k in the prior two months. This is a sharply higher rate of growth than in the first five months of the year when gains averaged under 44,000. Nursing homes accounted for 8.9k jobs. Childcare centers also added 3.3k jobs. Employment in both sectors is still below its pre-pandemic level.
Construction and Manufacturing Continue to Add Jobs
Construction and manufacturing, the two most cyclically sensitive sectors, are still adding jobs at a healthy rate, adding 22k and 16k, respectively in August. It is difficult to envision a recession where these two sectors still increase employment. Employment in manufacturing is now 212k higher than it was in February 2020.
Trucking Loses 36.7k Due to the Shutdown of Yellow Trucking
The Yellow trucking company went out of business last month, which led to a loss of 36.7 jobs in the industry. Presumably, at least some of these jobs will be filled by other companies in the coming months.
The motion picture industry lost 16.8k jobs after losing 9.2k in July. This is the result of the strikes by the writers’ and actors’ unions.
Payroll Employment of Women Rises by 144k in August
Women lost a disproportionate share of jobs in the pandemic, as sectors like restaurants and hotels, where most of the workforce are women, were largely shut down. As employment in these sectors has bounced back, women’s share of total employment has moved back to 49.9 percent. It had peaked at slightly above 50.0 percent in several months in 2019.
Share of Unemployment Due to Voluntary Quits Falls to 12.8 Percent
Consistent with the declining quit rate reported in the JOLTS data, the share of unemployment due to voluntary quits fell to 12.8 percent in August, down from 14.6 percent in July. This is well below the peaks hit in 2018 and 2019 and down from a peak of 15.8 percent hit in September of last year. It is still a reasonably high level but hardly one that should raise concerns about an overheated labor market.
Black Unemployment Rate Fall to 5.3 Percent
The unemployment rate for Black workers fell to 5.3 percent in August from 5.8 percent in July and 6.0 percent in June. The June rate was a big increase from the record-low 4.7 percent rate hit in April. The monthly data are erratic, so it is likely that the April rate understated the actual unemployment rate, while the June rate probably overstated it. The 5.3 percent rate reported for August equals the lowest rate ever reported before the pandemic.
On the Whole, Slightly Scary but Positive Report
It is hard not to be bothered by a 0.3 percentage point one-month jump in the unemployment rate. However, on closer inspection, there does not seem to be much in the August report that we should find troubling. The rise in unemployment was entirely driven by an extraordinary reported jump in the size of the labor force. This is undoubtedly partly real, but almost certainly also partly an error in the survey, as well as a fluke of seasonal adjustment. In any case, if we look at the 222k employment growth reported in the household survey, it is difficult to see that coinciding with continuing rises in unemployment.
The establishment survey is giving us a very similar picture. The 150k average over the last three months is almost certainly on the high side of what can be sustained in an economy with under 4.0 percent unemployment.
This report also should be good news in that it is showing slightly slower wage growth and also a pace of hours growth suggesting another quarter of good productivity growth. This should alleviate the Fed’s fears about inflation.
