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US Employment Recovery Continues

The US August employment report showed continued payrolls improvement, though the size of those gains continues to slow and likely reflects the return of laid-off workers rather than new job creation. Likewise, the unemployment rate fell sharply in the month to 8.4% but remains more than twice the size of the pre-COVID rate of 3.5% in February.

It’s expected that payrolls will continue to rise over the next few months, but the level of continuing jobless claims and monthly job layoffs suggest that the pace will be insufficient to make up for the job losses since the beginning of the pandemic. It’s likely that many people are losing and recovering the same job repeatedly as business conditions fluctuate.

Nonfarm payrolls rose by 1.371 million in August, below the 1.400 million gain expected, the Bureau of Labor Statistics reported Friday. This followed a downward revision to July payrolls to a 1.734 million gain and a downward revision to June payrolls to a 4.781 million increase. Private payrolls rose by 1.027 million after an increase of 344,000 in government payrolls is excluded. Analysts had expected private payrolls to rise by 1.360 million. Most of the government payrolls gain was in the Federal sector, reflecting hiring for the 2020 Census.

The largest private payrolls improvement was in the retail sector, which added 248,900 jobs in August after a 236,200 gain in July. Leisure and hospitality jobs rose only by 174,000 after a 621,000 increase in July and a 1.979 million increase in June as most restaurants and hotels that can reopen have already done so. The services sector added a total 984,000 jobs in August after a 1.420 million increase in July.

Manufacturing jobs rose by rose by 29,000 and construction added 16,000 jobs. The goods sector added a total of 43,000 jobs.

Average hourly earnings rose by 0.4% after a 0.1% gain in July, putting the year/year rate at a still elevated 4.7%. Earnings were up only 3.0% year/year in February before the COVID-related shutdowns.

In the household survey, the unemployment rate fell to 8.4% from 10.2% in July, a larger drop than expectations for a decrease to 9.8%, but still elevated compared with pre-COVID levels.

The BLS again cited the issue of mis-labelling temporarily furloughed workers as unemployed on temporary layoff rather than as simply absent from work. However, this month, it said the impact on the not seasonally adjusted figure would have been about 0.7 percentage point, and even that may an overestimation of the miss.

Before seasonal adjustment, the unemployment rate was reported at 8.5% after 10.5% in July, so even a 0.7 percent point adjustment would leave the August reading well below the July level. The labour force participation rate rose to 61.7% from 61.4% in July, indicating a further return of workers to the labour force. In August, the number of employed rose solidly, while the number of unemployed declined, resulting in the sharp drop in the unemployment rate.

The wider U-6 rate, which represents those underemployed and those working part-time rather than full-time, fell to 14.2% from 16.5% in July, suggesting that many temporarily furloughed or underemployed workers were able to find jobs.

Colin Lambert

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