01.09.2017 - Employment growth slows in August

non-periodical


The Bureau of Labor Statistics announced today that nonfarm payrolls increased by 156,000 in August, thus matching almost exactly our expectations and being below the consensus estimate. The initially reported growth for July and June was revised downwards by a total of 41,000 jobs. The unemployment rate rose 0.1pp to 4.4%.

Market reaction: The dollar gained against the Euro winning 0.3 cents to 1.189 EUR/USD. US government bonds suffered losses. The yield for ten year treasuries climbed by 3bp to 2.16%.

Assessment: With today´s figures the average employment plus for the past three months stands at 185,000. Since January this number amounts to 176,000, which is only slightly below the average of the year 2016 (187,000). Despite the already tight labour market the employment dynamic seems not to have lost much of its strength. However, in view of the already high utilisation such a slowdown is just a matter of time. There are just not enough workers available to fill the large number of vacancies. A gradual decline in the trend of employment growth is therefore to be foreseen, which however is unproblematic: according to estimates from various regional Federal Reserve banks, a monthly employment plus of less than 100,000 is currently sufficient to keep the labour market in balance, i.e. to hold the unemployment rate at the current level. In other words: As long as employment increases by more than 100,000 per month, the unemployment rate will continue to decline.

Other indicators of the labour market report developed in a heterogeneous manner in August. According to the household survey, for instance, the number of employed persons decreased by 80,000 and the number of persons registered as unemployed grew by 151,000. The participation rate remained stable at 62.9%. The unemployment rate rose by 0.09pp to 4.44%. The underemployment rate often referred to by Fed Chair Janet Yellen remained constant at 8.6%, primarily due to the fact that the number of persons in involuntary part-time employment dropped by a total of number of 27,000. At 8.6%, however, the underemployment rate still lies clearly below the average of the years 1994 through 2007 (8.9%). The number of discouraged workers who have given up the search for employment decreased in August by 88,000, which is higher than usual for this month.

As we expected, average hourly wages increased by only 0.1% month on month in August due to a calendar effect a truly disappointing development yet again. The yoy rate stagnated at 2.5%.

It is also worth mentioning that the downward revision of the employment figures for June and July are owing to the public sector exclusively. Regarding the private sector, figures were even revised upwards by a total number of 10,000.

Monetary policy implications: The US central bank is likely to see the labour market report as a further confirmation that the economy is developing according to its expecta-tions, i.e. the economy is growing moderately and the labour market situation continues to improve. We think that the labour market data will not prevent the Fed from announcing the start of the balance sheet reduction at its next rate setting meeting on 20 September.


Labour market report
Total economy excl. agriculture, seasonally adjusted, mom in thsd.

 

August

RBI

Consensus

July

June

Non farm payrolls

156

160

180

189

210

 - Total private

165

-

-

202

207

    - Goods producing

70

-

-

23

42

    - Service providing

95

-

-

179

165

 - Government

-9

-

-

-13

3

Unemployment rate, %

4.4

4.3

4.3

4.3

4.4

Source: Bloomberg, RBI/Raiffeisen RESEARCH


 
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Creation time of this publication: 01/09/2017 05:24 PM (CEST)
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