August Jobs Report hold strengths and weakness

The August Jobs Report, from the Bureau of Labor and Statistics, on Friday, showed an increase in non-farm employment for Americans, with a rolling figure of 201,000, with 192,000 forecasted; a figure that makes many observers, consumers and economists happy, and with an unemployment rate holding steady at 3.9 percent, there is real joy on Main Street, as well as Wall Street.

“This is the strongest labor market in a generation of workers,” said Andrew Chamberlain, chief economist at the career site Glassdoor.

Business Insider exclaimed, from the seeming rooftop, “initial jobless claims [are] at their best level since 1969, the labor market is still largely in good shape.”

Adding to the luster of this report is that there has been an increase in wages - long a conundrum for many economists and bankers -- yet before the parades began, and the band strikes up, there is the sobering reminder is that the weekly wage only rose 3.2 percent; “The average hourly pay for employees on private nonfarm payrolls rose by 10 cents, to $27.16.”

“Average hourly earnings increased by 0.4% month-on-month. And at 2.9% year-on-year growth, wages increased at their fastest pace since June 2009,” noted businessinsider.com and that is the good news for some.

On the private side, ADP reported in advance of Friday’s BLS report that “Companies added 163,000 jobs for the month, a considerable slowdown from the 217,000 added in July and well below what had been an average of 206,000 a month. Economists surveyed by Reuters had been expecting 190,000 new hires,” reported cnbc.com.

"Although we saw a small slowdown in job growth the market remains incredibly dynamic," Ahu Yildirmaz, vice president and co-head of the ADP Research Institute, said in a statement.

To be fair, some consider this a less than spectacular report, since the wage increase is less than modest, but most are content to see that there are no major upsets. And, increases are also seen across the board, with women and racial minorities included.

While there are jobs galore, especially for those without a college degree, many employers are still complaining about candidates lack of specific skills needed to meet their needs, and supporting that view is Jim Baird, the chief investment officer of Plante Moran Financial Advisors, who said in a note:  "Increasingly, the challenge is one for employers trying to find workers,” that can give them what they want.

Subsequently, “there are severe labor shortages for jobs demanding specialized skills, licensing requirements or tough working conditions.”

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As has been the case for several prior months, labor force participation has been slow, and came in at 0.2 percent, or 62.7 percent of 62.7 percent.

A broader measure than the headline rate, or what we call the marquee rate, of 3.9 percent, are those that have been called discouraged workers, mostly working part-time jobs when they would prefer full time, and that rate fell to 7.4 percent, from 7.5, and 781,000 of them have moved to full-time employment, a 17 year low.

Others caution that the figure for these workers, remained relatively unchanged from August 2017.

Secondary to that are “prime age workers, those aged 25 to 54, “who are working or looking for jobs. This figure dipped to 79.3 percent, from 79.5 percent in July. That is substantially higher than in the depths of the recession, but still below its 2000 level, when it exceeded 81 percent, said Elise Gould, an economist at the left-leaning Economic Policy Institute.”

For the winners in August, “Leading the pack is business services that came in with 53,000 jobs, yet as we have cautioned before this is a catchall figure than can include temporary and staffing firms as well as those that support business needs, such as executive search firms, and even some retailers.

August, traditionally, a vacation month for many, will show revised figures in a few weeks, and this might affect the figures shown for manufacturing which took a hit, not one that would worry economists, but seems to be affected by tariffs put forth by President Trump and indeed, “The manufacturing sector, however, which Mr. Trump has made a centerpiece of his economic and trade policies, registered fewer gains than had been previously thought,” said The New York Times.

Related news showed that “The combined addition of 93,000 jobs that the government originally reported for May, June and July was revised down to 62,000. And in August, the sector shed 3,000 jobs. The auto industry, which is particularly exposed to trade, eliminated 4,900 jobs last month after cutting 3,500 in July.”

In the absence of agricultural jobs, some caution is needed here, and while that area is subject to volatility, most of the US economy is domestic, and  in contrast, some say: “Manufacturing employment creation was still pretty good” in previous months, noted Carl Tannenbaum, chief economist at Northern Trust.

“The impact of the tariffs that are in place now are annoying but modest in size and limited in scope, though the risk is certainly there. If tariffs broaden, we could see business activity impaired much more significantly.”

Adding to the more pessimistic tone is Challenger, Gray and Christmas, who noted in their statement: ““Last month saw an increase in companies attributing job cuts to tariffs, specifically tariffs on imported steel, which are ongoing, and newsprint, which have recently been overturned. Companies announced 521 job cuts due to these tariffs in August, for a total of 591 so far this year.”

“Manufacturers are grappling with rising costs, weak demand, and competition on a global scale. We may see additional job cuts as the full ramifications of imposed tariffs are felt,” said CEO John Challenger.

Looking away, for one moment, we have “In some occupations — typically those with low-skill requirements and relatively pleasant working conditions — there is a huge oversupply of candidates,” said Julia Pollak, a labor economist at the online employment market site ZipRecruiter.

One overlooked area, she told the Times, is that “Geography is critical: Lower-wage workers rarely move for a job, so openings in distant places, of course, might not be useful to them. Still, on average, Ms. Pollak wrote in an email, “it is harder (in some sense, at least) to get a job as an administrative assistant, receptionist or warehouse worker than it is to get into Harvard, with its relatively generous 5.2 percent acceptance rate” in 2017.

Meanwhile, the Federal Reserve “continues to focus on removing accommodation by boosting interest rates, and the August employment numbers are consistent with the central bank’s outlook," said Mark Hamrick, senior economic analyst at Bankrate.com. "The trajectory of future rate moves will be under scrutiny as the FOMC updates the summary of economic projections."

The Feds have targeted two hikes before the end of the year: 2.25 percent and 2.50 percent, and in response to the news, as well as the report, the Market showed that 10 year Treasuries were up on Friday, 2.904 percent from 2.877; and Dow Jones and S&P were down by 0.4 percent.

Adding a huge cautionary note is nbcnews.com who said that “The August jobs report ratifies the fact that for the first time in at least a generation, the U.S. has more open jobs than people out of work and looking for a position. While that is a condition ripe for job hunters, it’s a negative for the economy, with companies wondering where all the new workers will come from, as the U.S. faces a declining birth rate and a wave of retiring baby boomers.”

On another macroeconomic note, the lower wages, while seeing a slight increase is not enough to propel consumer spending forward, a key driver of the US economy, and increases “will depend upon better consumer spending, which means wage increases will need to accelerate,” said Joel Naroff, president of Naroff Economic Advisors.

While the president was away, at a rally, Vice-President Pence tweeted: “Promises made and promises kept! @POTUS Trump’s STRONG agenda is working for the American people. 201,000 new jobs in August and more than 4 MILLION jobs created since Election Day. The economy is roaring back and we’re just getting started!”

Partisanship aside most economists attribute that President Obama handed a near capacity employment, and healthy economy, with help from Janet Yellen, to President Trump.