The U.S. job market hit a lull in August, with employers adding a solid but less-than-robust 156,000 jobs and holding back on meaningful pay raises for most workers.
Friday’s jobs report from the government pointed to an economy that is still steadily generating jobs, though more slowly than it did earlier in its recovery from the Great Recession. With the economy now in its ninth year of expansion and unemployment near a 16-year low, fewer people are looking for work and fewer jobs are being filled.
The hiring data for August had yet to account for the damage from Hurricane Harvey, whose economic impact will be felt in coming months as more people seek unemployment benefits and industrial production will likely reflect the loss of Texas refineries and factories.
The unemployment rate ticked up from 4.3 percent to a still-low 4.4 percent, the Labor Department said. The government also revised down its estimate of job growth in June and July by a combined 41,000, leaving an average monthly gain this year of a decent 176,000.
One reason why few analysts expressed concern about last month’s slower job gain is that monthly employment reports can be volatile – especially figures for August. Employers are gearing up for the start of fall, schools are reopening and the government can’t always precisely factor those changes into its August employment data.
“It’s more noise than signal,” Joe Brusuelas, chief economist at tax consultant RSM, said of Friday’s report. “Focus on the longer-term trend of growth in employment.”
One persistent soft spot in the job market has been meager pay raises. Average hourly pay rose just 2.5 percent over the 12 months that ended in August. Wage growth typically averages 3.5 percent to 4 percent annually when unemployment is this low.
Economists note that low unemployment normally results in higher pay raises once employers feel compelled to pay more to attract or keep workers. Most say they think U.S. wage growth will eventually accelerate. But economists have noted that average pay growth has been muted in part because older workers with higher wages are retiring while younger millennials who earn less are being hired.
Some employers are already feeling the need to pay more for entry-level workers.
With unemployment so low, MOOYAH Burgers, Fries and Shakes, based in Dallas, said it’s paying more to attract entry-level talent and developing ways for workers to be promoted into higher positions with the company.
Michael Mabry, the franchise restaurant’s CEO, said he plans to add 15 locations before year’s end to the chain’s roughly 100 existing sites.
“The people are out there – we just have to offer an enticing reason why to come to work for our brand,” Mabry said.
The August jobs report arrives as Americans have grown more optimistic about the economy. A measure of consumer confidence in August hit its highest level in 16 years, the Conference Board said this week.
Inflation is low. Consumer spending in July rose at its fastest pace in three months. The stock market is up 10 percent so far this year. One measure of factory orders suggests that business investment is increasing.
Even the traumatic damage caused by Harvey around the Houston region may not break the national economy’s stride. Gasoline prices are rising as the flooding from Harvey knocked out refineries and ports, but rebuilding efforts in the coming months could provide a stimulative benefit.
Gus Faucher, chief economist at PNC Financial, predicts that job growth in the coming months “will weaken substantially” in the wake of Harvey, only to rebound quickly as workers who were temporarily laid off are rehired.
Beth Ann Bovino, U.S. chief economist at S&P Global Ratings, said the extent of the short-term drag on the economy “depends on how disruptive the floods remain for the next few weeks.”
She said hiring could be subdued in September if the flooding is slow to recede. Once the flooding ends, companies in the Houston area are unlikely to immediately hire because the focus will be on rebuilding. Eventually, though, natural disasters that involve flooding usually lead to more construction and health care jobs.
Overall, hiring this year has averaged 176,000 a month, close to 2016’s average of 187,000. August was the 83rd straight month of job gains.
The slowing job gains, coupled with uncommonly low inflation, might make the Federal Reserve hesitant to raise its key short-term interest rate by December, when many Fed watchers had foreseen the next rate hike.
“The Fed has to be second-guessing December,” said John Silvia, chief economist at Wells Fargo.
The August jobs report showed that roughly the same proportion of people last month as in July either had a job or were looking for one. Anyone not actively looking for a job isn’t considered part of the labor force and isn’t counted as unemployed. This so-called labor force participation rate held at 62.9 percent.
The participation rate has tumbled from 66 percent over the past decade, but the decline reflects in part an aging U.S. population that is retiring. Some economists say that in light of that trend, a stable participation rate is a positive sign for the economy.
One of the leading sources of job growth last month was manufacturing, which added 36,000. An additional 28,000 jobs came from construction and 20,200 from the health care sector. By contrast, governments shed 9,000 jobs.
But increased consumer sentiment failed to increase retail hiring. Restaurants and bars – often a major source of hiring – added just 9,200 jobs. Retail stores and auto dealers added just 800 jobs after having lost 1,900 in July.
Source: Associated Press