US JOBS REPORT SEPTEMBER 2018
Event- On a seasonally adjusted basis, total nonfarm employment rose by 201,000 in August, according to the US Bureau of Labor Statistics (BLS) in its monthly jobs report. Temporary help services employment rose by 0.3% in August, adding 10,000 jobs, and the temporary penetration rate remained at 2.04%. The national unemployment rate remained at 3.9%.
Background and Analysis- On a year-over-year (y/y) basis (August 2018 over August 2017), total nonfarm employment was up 1.6%, and monthly job gains have averaged approximately 194,000 over the past 12 months. Temporary help employment was up 2.9% y/y, with monthly job gains averaging approximately 7,100 over the past 12 months.
Of the 15 major industry groups, the three that most drove total nonfarm employment growth in August (on a seasonally adjusted basis) include professional services excluding temporary help (+43,000), healthcare and social assistance (+40,700), and construction (+23,000). There were four decliners. After two months of being in the top three, manufacturing declined by 3,000 jobs. The information and government industry groups, which have generally been the two weakest groups over the past year, were weak again this month with declines of 6,000 and 3,000 jobs, respectively. Retail trade, which has been quite volatile this year, was down this month by 5,900 jobs. On a year-over-year basis, natural resources/mining led all industry groups in terms of percentage growth in employment, with 8.1%, followed by construction and transportation/warehousing, with 4.3% and 3.3% growth, respectively.
BLS Revisions- The change in total nonfarm payroll employment for July was revised from +157,000 to +147,000 and the change for June was revised from +248,000 to +208,000. With these revisions, total nonfarm employment gains during the two-month period were 50,000 less than previously reported.
The change in temporary help services employment for July was revised from +27,900 to +10,900 and the change for June was revised from -7,500 to -6,500. With these revisions, temporary help employment growth was lower than previously reported by 16,000 jobs.
Staffing Industry Analysts’ Perspective- Despite the tightening labor market, companies were able to find 201,000 more employees to add last month, and average growth over the past three months has been a steady 185,000. In temporary help, downward revisions to June and July more than offset growth in August. Nevertheless, average growth in temporary help jobs over the past three months is 4,800 (which makes up 2.6% of the increase in total employment, greater than the current temporary penetration rate of 2.0%).
Average hourly earnings has garnered increasing attention as many have been wondering when the tightening labor market would finally yield higher wages. While we don’t want to make too much out of one month, data for the month was quite favorable, with growth of 0.4% in August, and 2.9% year-over-year (up from 2.7% in the prior month). It would make sense to see wage growth gain a bit of traction as it will become increasingly difficult for companies to find workers to meet the demand of an economy expected to remain strong into 2019 at least. The unemployment rate cannot get much lower, leaving additions to the labor force as the other source for new employees. (The labor force declined in August and the average gain over the past three months is only 79,000). As the pool of available new employees diminishes, companies will increasingly need to hire workers who already have jobs, which could accelerate movement from lower-wage service jobs in the leisure/hospitality and retail industry groups into industries such as manufacturing, construction, and natural resources/mining. Along with greater pay within industries, a mix shift from lower-wage to higher-wage industries could also contribute to average wage growth.
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