August Employment Report: What You Need to Know

Posted on 03/09/2017 10:26 AM

Payrolls rise 151,000; unemployment steady at 4.9 percent


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The U.S. economy added 151,000 jobs in August, below expectations for an increase of 180,000. The unemployment rate, calculated via a different survey, held at 4.9 percent while expectations were for a tick down to 4.8 percent. Let’s take a look at what the report may mean for markets and Federal Reserve decisions ahead.

Jobs continued to expand in service-related industries, such as food services ( 35,000), social assistance (( 22,000) and professional and technical services ( 20,000).

Mining, where the oil industry falls, shed more jobs, losing 4,000 during August and bringing the cumulative job losses in the sector since Sept. 2014 to 223,000.

The average workweek rose 0.1 hour to 34.3 hours during August, while wages rose by 3 cents to $25.73 per hour. That put the annual increase at 2.4 percent, down from the 2.6 percent increase in July.

The strong July report was revised up while June was revised down – July is at 275,000 (255,000 prior) and June is at 271,000 (292,000 prior), for a net reduction of 1,000 jobs. Over the prior 12 months, job gains averaged 204,000 and averaged 232,000 the past three months.


Comments: This report creates more uncertainty than if the report had come in closer or at trade expectations. The immediate assessment is that this dramatically lowers the odds of a September rate increase. The Fed funds futures market is voting that way – that market signals a 12 percent change for a September rate increase compared to 27 percent ahead of the report. Odds for a December rise, however, remain just above 50 percent.

Keys to report. The essentially steady labor force participation rate, slowdown in wage growth and steady unemployment rate are the main keys in the data. Revisions to the prior reports were essentially flat with the net reductions of 1,000 – not a big shift.

Markets are also mostly taking the data in stride, though gold futures have shot up. The reading on the data is what were realistically relatively small odds of a September increase are now even smaller.


 

NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws.

 

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