The U.S. labor market appear to continue its resilience with U.S. employers adding 187,000 workers in August, higher than the expected 170,000 consensus. The ADP Employment Report for August grew 177,000 in August 2023, the lowest in five months was released a day ahead of the BLS employment report. July’s employment gain was revised down by 30,000, from +187,000 to +157,000. The jobless rate was 3.8% in August the Labor Department reported Friday. The job market is still tight, with the national unemployment rate hovering near half-century lows but this is an 18-month high.
Astonishingly all single monthly payrolls print in 2023 has been revised lower. June was revised down by 80,000, from +185,000 to +105,000, the original 209K has been revised 50% lower to 105K and from original expectations of 230K. BLS said “with these revisions, employment in June and July combined is 110,000 lower than previously reported.”
Wage gains exceed both their pre-pandemic pace and what Fed officials would likely see, 3.5% annual wage growth consistent with inflation near their 2% target, assuming that worker productivity grows modestly.
The resiliency of the labor market continues to raise the odds of further tightening from the Federal Reserve.
August 2023 US Employment Report
August 2023 US Employment Report and Expectations
The jobless rate was 3.8% in August the Labor Department reported Friday. The unemployment rate is higher than the pre-pandemic rate of 3.5%, which was a 50-year low. (This was bettered in Jan at 3.4%) The job market is still tight, with the national unemployment rate hovering near half-century lows but this is an 18-month high.
Highlights
Employment
- Change in Nonfarm Payrolls Aug: 187K (exp 170K; prevR 157K)
- Unemployment Rate Aug: 3.8% (exp 3.5%; prev 3.5%)
- Labour Force Participation Rate Aug: 62.8% (est 62.6%, prev 62.6%)
- Prior two-month net revision Aug: -110K vs -49K prior
The unemployment rate and number of unemployed persons prior to the coronavirus (COVID-19) pandemic was 3.5 percent and 5.7 million, respectively, in February 2020). The number of employed persons in The United States increased to 161,262,000 in July of 2023 from 160,994,000 in June of 2023.
- Change In Private Payrolls Aug: 179K (exp 148K; prevR 155K)
- Change In Manufacturing Payrolls Aug: 16K (exp 0K; prevR -4K)
- Household survey Aug: +222K vs +268K prior
- Underemployment Rate U6 Aug: 7.1% vs 6.7% prior
- Birth-death adjustment Aug: +103K vs +280K prior
- Long-term unemployed June: mil vs (prev 1.1m, 1.2m pre-pandemic)
- The long-term unemployed decreased to 0.66 percent in June from 0.71 percent in May of 2023.
- The employment-population ratio June 60.30% vs (prev 60.3%, 61.2% before pandemic)
Revisions Concern
Astonishingly all single monthly payrolls print in 2023 has been revised lower. June was revised down by 80,000, from +185,000 to +105,000, the original 209K has been revised 50% lower to 105K and from original expectations of 230K. BLS said “with these revisions, employment in June and July combined is 110,000 lower than previously reported.”
Earnings
- US Average Hourly Earnings (M/M) Aug: 0.2% (exp 0.3%; prev 0.4%)
- US Average Hourly Earnings (Y/Y) Aug: 4.3% (exp 4.3%; prev 4.4%)
- Average Weekly Hours All Employees Aug: 34.4 (exp 34.3; prev 34.3)
- Payrolls benchmark NSA revision for 2022 was in Jan 23
- Payroll benchmark SA 2022 was in Jan 23
Other Employment Reports for August
- ISM services employment not yet released
- ISM manufacturing employment not yet released (coming later on Friday)
- Challenger Job Cuts 75.15K vs 23.70K prior, up 210% y/y
- Philly employment -6 vs -1 prior
- Empire employment -1.4 vs +4.7 prior
- Initial jobless claims survey week 232K vs 221K last month
The market had expected the August report released Friday to show nonfarm payrolls rose 170k new jobs. August was impacted by higher interest rates and prices started to weigh on the economy. Private payroll company ADP reported that US private sector jobs grew by +177K vs 195K expected and +371K prior.
A severe labor shortage had driven up annual wage increases above 5% every month of this year until the last quarter. By contrast, wage gains averaged 3.2% in the 12 months to February 2020. Wage growth rose last month with, average hourly earnings rose by +0.2% m/m vs +0.3% expected in August from a month earlier. They were up 4.3% from a year earlier.
Employers hired across industries. Companies in certain industries that are vulnerable to interest-rate increases, such as technology and real estate, have announced layoffs. Some firms have implemented hiring freezes.
Participation
Labor force participation rate moved up from 62.6% to 62.6% prior; rate for women moved up to highest since pandemic started. Participation is down from 63.4% in February 2020.
Market Reaction
- We saw a big reversal from the initial buy stocks, buy bonds sell dollars once the markets settled in.
- US 30-year yields lead the way higher, up 8.5 bps to 4.288%. The front-end with 2s flat at 4.85%, though well-above the post-NFP low of 4.76%. WTI oil is over $85 is feeding inflation concerns.
- Cleveland Fed Mester (2024 FOMC voter) said “Job market still strong amid signs of rebalancing, 3.8% jobless rate is still low
- Dow +105.49 at 34827.40, Nasdaq -22.95 at 14012.02, S&P +5.64 at 4513.30
- Some mega caps rolled over, bringing the major indices down with them.
- Small cap stocks are outperforming, fueling a 1.3% gain in Russell 2000.
Fed Funds
- Fed pricing changed with the probability of a 25-basis points rate hike in November is 36.0% now versus 41.1% yesterday, according to the CME FedWatch Tool.
WSJ Fed Watcher Nick Timiraos on the jobs report:
Where the Jobs Were:
Largest gains (prior month) occurring in:
- Health care (+71,000),
- Leisure and hospitality (+40,000),
- Social assistance (+26,000), construction (+22,000).
Largest losses (prior month) occurring in:
- Transportation and warehousing lost 34,000 jobs, as the bankruptcy of Yellow, a major trucking company, left about 30,000 workers without jobs.
- Information employment changed little (-15,000), with employment in motion picture and sound recording industries decreasing by 17,000, reflecting the absence of striking Hollywood actors, who are not counted as employed.
Household Survey Data
The unemployment rate rose by 0.3 percentage point to 3.8 percent in August, and the number of unemployed persons increased by 514,000 to 6.4 million. Both measures are little different from a year earlier, when the unemployment rate was 3.7 percent, and the number of unemployed persons was 6.0 million.
Among the major worker groups, the unemployment rates for adult men (3.7 percent), Whites (3.4 percent), and Asians (3.1 percent) rose in August. The jobless rates for adult women (3.2 percent), teenagers (12.2 percent), Blacks (5.3 percent), and Hispanics (4.9 percent) showed little change over the month.
Among the unemployed, the number of job losers and persons who completed temporary jobs increased by 294,000 to 2.9 million in August, offsetting a decrease of 280,000 in July. In August, the number of new entrants edged up to 597,000. (New entrants are unemployed persons with no previous work experience.)
Both the number of persons unemployed less than 5 weeks, at 2.2 million, and the number of long-term unemployed (those jobless for 27 weeks or more), at 1.3 million, edged up in August. The long-term unemployed accounted for 20.3 percent of all unemployed persons.
In August, the labor force participation rate rose by 0.2 percentage point to 62.8 percent, after being flat since March. The employment-population ratio was unchanged over the month at 60.4 percent.
The number of persons employed part time for economic reasons, at 4.2 million, changed little in August. 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.
In August, the number of persons not in the labor force who currently want a job was 5.4 million, little changed from the prior month. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.
Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force was little changed at 1.5 million in August. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, also changed little over the month at 386,000.
Establishment Survey Data
Total nonfarm payroll employment increased by 187,000 in August, less than the average monthly gain of 271,000 over the prior 12 months. In August, employment continued to trend up in health care, leisure and hospitality, social assistance, and construction. Employment in transportation and
warehousing declined.
Private Jobs
- In August, health care added 71,000 jobs, following a gain of similar magnitude in the prior month. Over the month, job growth continued in ambulatory health care services (+40,000), nursing and residential care facilities (+17,000), and hospitals (+15,000).
- Employment in leisure and hospitality continued to trend up in August (+40,000). The industry had gained an average of 61,000 jobs per month over the prior 12 months. Employment in the industry remains below its pre-pandemic February 2020 level by 290,000, or 1.7 percent.
- Employment in social assistance increased by 26,000 in August, in line with the prior 12-month average gain (+22,000). Over the month, job growth continued in individual and family services (+21,000).
- Construction employment continued to trend up in August (+22,000), in line with the average monthly gain over the prior 12 months (+17,000). Within the industry, employment continued to trend up over the month in specialty trade contractors (+11,000) and in heavy and civil engineering construction (+7,000).
- Transportation and warehousing lost 34,000 jobs in August. Employment in truck transportation fell sharply (-37,000), largely reflecting a business closure. Couriers and messengers lost 9,000 jobs, while air transportation added 3,000 jobs. Employment in transportation and warehousing had shown little net change over the prior 12 months.
- Employment in professional and business services changed little in August (+19,000) and has shown essentially no net change since May. Professional, scientific, and technical services employment continued to trend up over the month (+21,000). In contrast, employment in temporary help services continued to trend down (-19,000) and has declined by 242,000 since its peak in March 2022.
- Information employment changed little in August (-15,000). Within the industry, employment in motion picture and sound recording industries decreased by 17,000, reflecting strike activity. Job losses continued in telecommunications (-4,000).
- Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; manufacturing; wholesale trade; retail trade; financial activities; other services; and government.
Government Jobs
Employment in government increased by 8k in August of 2023, the smallest gain since December, and following a downwardly revised 2k rise in July and compared to forecasts of a 2k decline.
Manufacturing Jobs
Manufacturing Payrolls in the United States increased by 16k in August of 2023, following an upwardly revised 4k decrease in July and compared to market expectations of zero growth.
Earnings
In August, average hourly earnings for all employees on private nonfarm payrolls rose by 8 cents, or 0.2 percent, to $33.82. Over the past 12 months, average hourly earnings have increased by 4.3 percent. In August, average hourly earnings of private-sector production and nonsupervisory employees rose by 6 cents, or 0.2 percent, to $29.00.
Wages Monthly
Wages Yearly
The average workweek for all employees on private nonfarm payrolls edged up by 0.1 hour to 34.4 hours in August. In manufacturing, the average workweek was 40.1 hours for the fifth month in a row, and overtime edged down by 0.1 hour to 3.0 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls edged up by 0.1 hour to 33.8 hours.
Hours
The change in total nonfarm payroll employment for June was revised down by 80,000, from +185,000 to +105,000, and the change for July was revised down by 30,000, from +187,000 to +157,000. With
these revisions, employment in June and July combined is 110,000 lower than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.
The Employment Situation for September is scheduled to be released on Friday, October 6, 2023, at 8:30 a.m. (ET).
Source: AFP, Challenger, DOL, TradersCommunity Data, BLS
From The TradersCommunity News Desk