August Jobs Report shows a cooling job market

The August Jobs Report released on Friday by the US ,Bureau of Labor and Statistics brought a certain measure of concern from both economists and laypeople alike, with 142.000 non farm jobs, after an expected 160,000, but while there was some wringing of hands, it was a fair assessment of what was expected after the immediate post pandemic figures of 939.000 jobs, a high that was bound to come down, and the unemployment rate was a modest 4.2 percent.

While some US employers may have hoarded workers to avoid layoffs and downward trends in profit, this reluctance did not translate into the doom and gloom some observers might have seen it as,but rather as Jeffry Roach, chief economist at LPL Financial noted to Reuters, “Businesses are still adding to payrolls,but not as indiscriminately.”

Certain key features of this report showed a level of stasis in both labor force participation, little changed from previously at 62.7, and 4.8 million people working part time for economic reasons.

Equally, there were 24,000 people that wanted a job, virtually unchanged from the July report.

All things considered this report showed solid growth, despite some concern about employment in some areas, but notable is that wages have kept up for most workers with inflation, as we also saw in July; but, this month average hourly earnings for all private non farm payrolls rose by “14 cents, or 0.4 percent, to $35.21. Over the past 12 months, average hourly earnings have increased by 3.8 percent”

There were some economists that showed a level of concern with the June revisions, a standard for these reports, due to reporting time; and June is now 118,000 jobs gained, and this, too, shows a stable pattern.

As Reuters reported, these revisions are not atypical and are representative of 10 of the last 13 years of job reports. But, some are seeing this as not only a cause for concern but signs of a recession, a durable position taken by some.

Areas that have peaked from this report are somewhat similar to earlier reports: Construction which has been a constant, reaching 34,000, and “higher than the average monthly gain of 19,000 over the prior 12 months,” health care at 31,000, but half than the average monthly gain of 60,000 from the previous 12 months.

Manufacturing, a cause of concern of the presidential candidates in the November election, edged down, says the report, but noted that, “manufacturing employment has shown little net change over the year,” and, social assistance continued its upward trend, over 13,000, “but at a slower pace than the average monthly gain over the past 12 months,” perhaps reflecting a greater investment in some communities.

What we didn't see was the usual back to school bump in education employment, but that might be due to the end of the collection period, and might be reflected in the September report.

Of course, no discussion of the monthly jobs report would be complete without the elephant in the room, inflation, and its effects on consumers, and their actions in the national economy.

While there has been a downward trend in inflation, 2.9 percent for August, and that rate has prompted Federal Reserve Chair Jerome Powell to say,that, “the time has come for policy to adjust,” at last month's meeting at Jackson Hole Wyoming; that said, much of the American public is focused on higher grocery prices, nearly obfuscating his anticipated actions in September to lower interest rates.

Predictions are for at least a 0.25 percent reduction

That aside, the main drivers of inflation, and its contributing factors tilt towards the costs of shelter, transportation and vehicle insurance, as the average person attempts to balance their monthly budgets. 

It’s a tight squeeze and the cooling, no matter how slight in the job market, and current interest rates, prices in some key areas will continue to rise, allowing for seasonal variations, as federal departments don’t seasonally adjust every consumer item, and experts advise that examining annual rates allow for a better picture; but, it’s also a good bet that most consumers are not going to look into, or take the time, to examine those detailed reports.

Inflation does have deleterious effects in many areas, but two key effects are in retirement savings, and savings accounts, but consumers do feel hamstrung between the higher prices of many common grocery items from frankfurters to instant coffee.

All in all, as Mark Hamrick, senior economist analyst at Bankrate, said to The Hill, “The August snapshot is consistent with other data pointing to a weakening job market, including a reduction in job openings pointing to relative balance between the supply and demand of labor.”

It also underscores the job that Powell and the Federal Reserve have done at balancing movements at calibrating between too much or too little action to preserve its traditional path at keeping inflation at 2 percent and the nation at full employment, a data driven task, but one that seems to have been met.