Economy

Jobs Report Fails to Impress, Unemployment Rate Steady

The hotly anticipated U.S. Jobs Report from the Bureau of Labor Statistics (BLS) for August was released this morning, as most first Fridays of a new month, and the headline came in lower than consensus expectations: 130K was more than 30K jobs fewer than expected, and nearly 30K lower than the previous month. The Unemployment Rate stayed steady at a very low 3.7%.

The private sector recorded only 96K new jobs last month — roughly lower than what’s needed to cover retirees in the domestic labor market month to month. Revisions to June and July dropped another 20K jobs in total, pointing to more weakness in recent employment metrics. This brings the 3-month moving average to 156K, basically what we saw in the three month average prior, demonstrating the corporate tax cuts from early 2018 had a finite positive affect on new jobs.

Further, without 25K new government hires in August for 2020 Census efforts, today’s BLS headline would have barely scraped 100K on the month. Manufacturing continued its slow march to lower jobs growth with 3000 new positions created; Retail posted negative job growth for the seventh straight month to -11K in August.

That said, there were plenty of positive things to take out of this report: along with a consistent 3.7% Unemployment Rate, Labor Force Participation rose to 63.2% (up a half point year over year), wage growth rose 0.4% (11 cents per hour) and +3.2% year over year, and the U-6 (aka “real unemployment”) lifted 20 basis points to 7.2%. Also, African American unemployment fell to its lowest-ever read: 5.5%.

And, although we’re now closer to averaging 150K new jobs per month, as opposed to the 200K or so we were seeing a few years ago, we’re still easily absorbing the monthly retirees and generating net gains in employment, even this long into the economic growth cycle, and even with a trade war having been waged nearly a full year.

Today’s numbers virtually remove all doubt the Fed will cut interest rates by another quarter point to 2% on the high end at the next FOMC meeting later this month. This will provide further upside for those looking for cheaper U.S. dollars and preemptively getting ahead of the potential global economic recession.

Perhaps wishing for a 50 basis-point cut has a little less justification (compared to, say, a BLS headline of 30K new jobs instead of 130K), but pre-market trading does not appear to be bothered too much by this latest report.


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