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The public policy blog of the American Enterprise Institute
No Wall Street economist does it quite like JPMorgan’s Michael Feroli. The headline on his analysis of the August jobs report: “Summer’s over, here’s your slap in the face.”
And then he really opens fire:
Labor market activity was disappointing again in Aug … The more comprehensive employment-to-population ratio ticked down to 58.3%; this measure is a mere 0.1% above its cycle trough, indicating that once one takes account of population growth there has been essentially no progress in repairing the labor market after the recent downturn. In fact, if you go through the details it’s hard to find any redeeming aspects to this jobs report. In terms of the broader economy, today’s numbers should check any enthusiasm that the economy was gaining momentum toward the end of the summer. Instead, the economy appears to remain stuck in the mud. The weak pace of labor income growth will likely limit the pace of consumer spending, which in turn means continued unsatisfactory GDP growth. Today’s number increases our conviction in our existing Fed call which looks for the FOMC to engage in further asset purchases and to push back rate guidance at next week’s meeting.
The details of the establishment survey were soft. Private employment increased 103,000 last month, with the deceleration from the prior month’s 162,000 most evident in goods-producing industries. Manufacturing, in particular, went from adding 23,000 jobs in July to losing 16,000 last month — a downshift that owed mostly to the motor vehicle sector. The hoop-la over the housing recovery has yet to translate into employment, as construction added a paltry 1,000 jobs last mont …
The wage data in today’s report was downright awful. All-employee wages rounded to flat (-0.04%) and are up only 1.7% over the past year. Production worker wages — which are arguably better-measured — were even worse, down 0.1% on the month and up only 1.3% over the past year. The overall household labor income implications are, not surprisingly, quite weak. Over the past three months total labor income (hours times average hourly earnings) have increased at a 2.6% annual pace in the all-employee measure and 2.1% in the production worker measure. With headline inflation this quarter likely somewhere in the mid-2’s, real labor income should be running close to flat.
The household survey details were also dismaying. The decline in the unemployment rate to 8.1% was quite certainly not good news: the seperately-reported labor flows data reveals that a 226,000 increase in the flow of workers going from unemployment to not participating in the labor force accounts for most of the 250,000 decline in unemployment. In other words, the unemployment rate declined because fewer jobless are not even bothering to look for work. The household measure of employment fell 119,000 and has been declined in four out of the last six months. Overall a pretty dreary picture of the labor market.
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