September 9, 2019
What really piqued my interest was what it told us about the economy, Tom. In the Labor Department’s report released Friday, we can really see a tension between the positive and negative factors that are at work in our economy. This morning I want to walk through the good news, the bad news, and what it all means for the economy.
The first thing is that the economy continues to create jobs, and people continue to fill them. While the unemployment rate stayed at 3.7 percent in August, we saw the labor force participation rise to 63.2%, its highest level since August 2013. Specifically, the total number of Americans considered employed surged to a record 157.9 million, up by 590,000 from last month according to the household survey, which is conducted separately from the headline establishment count. And Black unemployment fell to a record low last month, helped by a jump in the number of Black women on the job. The unemployment rate for Black workers fell to 5.5% from 6%, according to the report. The previous record low of 5.9% was set in May 2018. Overall, the percentage of Americans aged 25 to 54 – considered prime working years – who were employed hit 80 percent last month, the best showing in the current expansion. Finally, wage growth remained solid, with average hourly earnings increasing by 0.4% for the month and 3.2% over the year; both numbers were one-tenth of a percentage point better than expected.
The labor market is tight right now, and that is a good thing for workers. Generally, in the United States we consider an unemployment rate of 5% to be full structural employment. We are now 1.3% below that mark. Not only is this tight labor market bringing workers who have been on the sidelines back into the economy, but as I mentioned it is helping drive wages up.
There were some numbers that could be cause for concern, first among them the number of jobs added last month. While economists had expected to see 150,000 new jobs added, the Labor Department report found 130,000 jobs were created — a 20,000 job shortfall. Excluding government hiring, private payrolls grew by just 96,000, the lowest pace since February. On top of this, the jobs numbers for June and July were revised downward. Revisions saw June’s job creation number cut from 193,000 to 178,000 while July’s fell from 164,000 to 159,000.
These numbers give us ample reason to believe that the economy is slowing down. As I have mentioned previously, there have been some experts voicing concerns about a recession. Certainly our economy is feeling the effects of the ongoing trade war with China, and the downshift in the global economy. If this slowdown continues, the labor market trends could reverse course.
White collar jobs sectors drove job growth last month. The biggest gains for the August came from professional and business services at 37,000. Government hiring also contributed, as the federal government hired 28,000 workers ahead of the 2020 Census. Health care and financial services also saw positive numbers, contributing 24,000 and 15,000 jobs respectively.
On the flip side, it was largely blue collar sectors that took a hit. Despite otherwise strong retail indicators and positive consumer spending, the retail industry saw a net decline in workers of 11,100. Trade, transportation and utilities lost 11,000 jobs, and mining and logging lost 5,000 positions.
Overall, it confirms that we are slowing down but there doesn’t seem to be a dramatic decline in the immediate future. The Federal Reserve Chairman Jerome Powell remarked that this was a good report and the labor market remains strong, so we shouldn’t expect dramatic interest rate cuts in the near future either. Overall, the economy seems to be chugging along, despite global concerns and trade tensions. Let’s hope it continues to do so!
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