Job Growth Slows to 130,000 in August

The Bureau of Labor Statistics reported that the economy added 130,000 jobs in August, down from an average of 173,000 over the last 12 months. Over the last three months, the average has been just 156,000. The August figure was inflated by temporary employees hired to conduct the 2020 Census. Private sector employment increased by just 96,000 in the month, bringing the average gain in the private sector for the last three months to 130,000.

The data in the household survey were more encouraging. While the unemployment rate remained at 3.7 percent, the employment-to-population ratio (EPOP) rose to 60.9 percent, a new high for the recovery and 0.6 percentage points above the year-ago level. The prime age (ages 25 to 54) EPOP also hit a new high of 80.0 percent, just 0.3 percentage points below the prerecession peak, but still 1.9 percentage points below the peak hit in 2000.

While the EPOP for both prime-age men and women rose in August. At 86.3 percent, the EPOP for prime-age men is still 0.4 percentage points below the 86.7 percent peak for the recovery, hit in March. The 73.9 percent EPOP for prime-age women is a new high for the recovery. While it is above its prerecession level, it is still 1.0 percentage points below the peak hit in 2000.

In other encouraging news in the household survey, the unemployment rate for blacks fell 0.5 percentage points to 5.5 percent, the lowest level on record. The unemployment rate for black women stood at 4.4 percent in August, a record low, and for black teens at 15.7 percent, also a record low.

Some other news in the household survey was less encouraging. The share of unemployment due to voluntary quits fell to 12.9 percent. This is an extraordinarily small share given the low unemployment rate. The share of unemployment due to quits averaged 13.4 percent in 1999 and 13.7 percent in 2000.

There was a jump of 397,000 in the number of people working part-time for economic reasons, although this was mostly a reversal of a sharp drop in July. More concerning is the fact that voluntary part-time employment, which had jumped following the implementation of the Affordable Care Act (ACA) in 2014, is now falling on a year-over-year basis. The level for August of 2019 is 106,000 below the year-ago level. If the ACA made people feel less dependent on employment for their insurance, that effect seems to be going away in the last couple of years.

While the establishment survey seems to be showing a weakening in job growth, wage growth appears to have picked up modestly. The average hourly wage has risen 3.2 percent over the last year. The annual rate of increase, comparing the last three months (June, July, August) with the prior three months (March, April, May), is 3.6 percent.

The largest job growth apart from the federal government was in health care, which added 23,900 jobs in August, down from its average of 32,700 over the last year. The temporary help sector added 15,400 jobs, its largest gain since May of 2017. Employment in professional and technical services rose just 14,800 in August, well below the average of 24,200 over the last year; although this followed strong growth in both June and July.

Restaurants added just 11,900 jobs in August, continuing a pattern of slow growth over the last four months. This could indicate that this low-paying sector is having difficulty attracting workers in a tight labor market. Retail lost 11,100 jobs in August, bringing its drop over the last year to 83,700 jobs (0.6 percent).

Manufacturing added 3,000 jobs, continuing a pattern of weak growth seen since February. The index of aggregate weekly hours in the sector is just 0.1 percent above its year-ago level. Construction added 14,000 jobs after losing 2,000 in July. The average gain over the last four months has been just 8,000 jobs.

On the whole, this should be seen as a generally positive report. There is clear evidence that job growth is slowing, but in a tight labor market, this should be expected. The pickup in wage growth is encouraging, although the fall in unemployment due to quits raises concerns about workers’ perception of their bargaining power.