U.S. nonfarm payrolls shrank a somewhat less-than-expected -216,000 (-0.2%) in August,
continuing a trend towards smaller job losses from the massive -741,000 in January. Payrolls were
revised down by 49,000 in the previous two months, though all in the public sector. Manufacturing
and construction continued to pace the job losses, with moderating declines in most other industries.
Cutbacks in temporary help services continued to slow, likely signalling some improvement in job
prospects ahead. On the down side, the household survey showed an even larger loss of jobs in
August (-392,000) (and has shown less of a trend towards moderating losses in recent months).
This lifted the unemployment rate to a higher-than-expected 9.7%, up 0.3 percentage points from the prior month and a 26-year high. Surprisingly, given the glut of available workers, average hourly earnings rose a larger-than-expected 0.3% for the second month. However, the yearly rate of increase still eased to 2.6%, well below the 3.8% clip in August 2008.
The index of aggregate weekly hours fell 0.3% in August and is down 2.5% annualized so far in
Q3 from Q2. This flags a downside risk to our Q3 GDP growth estimate of 3.8%, and likely implies
another huge gain in productivity—a plus for the inflation outlook.
Total job losses since the recession began in December 2007 amount to 6.9 million, the worst
percentage decline (5.0%) since 1949.
The Bottom Line: The job losses are slowing in typical lagged fashion as the economy emerges from
recession. But they remain large, and joblessness continues to mount, which can only make it harder for households to repay debt and rebuild savings, thereby impeding a consumer-led recovery.
With a growing proportion of prime-rate mortgagees behind on payments because of rising joblessness, some stabilization in job markets is crucial to sustaining the economic recovery.
Sal Guatieri
