Nonfarm Payrolls Increased 235,000 in August
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Implications:  Plenty of demand for labor in August but not that many new jobs, at least as far as the payroll survey was concerned.  Nonfarm payrolls rose 235,000 in August, substantially below the consensus expected 733,000, well below the forecast of every economics group, and the slowest growth since January.  However, the details of the report do not suggest persistent weakness in the job market.  Civilian employment, an alternative measure of jobs that includes small-business start-ups, increased 509,000 in August.  As a result, the unemployment rate declined to 5.2%, the lowest levels since the COVID pandemic started.  Moreover, the weakness in payrolls in August was largely concentrated in restaurants & bars, where payrolls declined 42,000 in August versus a gain of 290,000 in July.  That one category accounted for most of the slowdown in job growth in August and was likely affected by a combination of the Delta variant as well as difficulty getting the unemployed to take jobs while college-age workers are going back to school.  Manufacturing rose a solid 37,000 in August, which was higher than expected considering all the problems in the auto sector with supply-chain issues, with computer chips, in particular.  Average hourly earnings did not show any lack of demand for labor, up 0.6% in August, up 4.3% from a year ago, and up 7.8% in the eighteen months since February 2020 (the last pre-COVID month).  Total hours worked also increased a respectable 0.2% in August, are up 5.1% versus a year ago, although still down 2.7% versus February 2020.  Combining hourly pay and the total number of hours worked shows that regular worker paychecks, in total, are up 4.9% versus February 2020.  Still, the economy has a long way to go before a full recovery.  We are still 5.3 million payrolls short of where we were in February 2020; down 5.6 million for civilian employment.  The labor participation rate is at 61.7% versus 63.3% pre-COVID; the employment-population ratio – the share of adults who are working – is 58.5% versus 61.1% pre-COVID.  We project that it will take until about mid-2022 to recover all the jobs lost during COVID, even assuming we get a surge in jobs in the next few months as fewer unemployed workers have access to excess unemployment benefits.  The early September withdrawal of excess benefits should spur a rush by the unemployed to fill many of the record-high 10.1 million job openings around the country.  The US labor market has a long way to go for a full recovery, but it is on track in spite of the relatively slow payroll growth in August.  Look for a rebound in the pace of job growth in September. 

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Posted on Friday, September 3, 2021 @ 11:40 AM

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