NFP: U.S. Adds 201K vs 191K Jobs Expected In August

by Ike Obudulu Posted on September 7th, 2018

Washington, DC, USA: Payrolls exceeded expectations at 201000 in August compared with the 191,000 median estimate in a survey of economists and the unemployment rate was unchanged at 3.9 percent, U.S. Bureau of Labor Statistics figures showed Friday.

Job gains occurred in professional and business services, health care, wholesale trade, transportation and warehousing, and mining.

Household Survey Data

The unemployment rate remained at 3.9 percent in August, and the number of unemployed persons, at 6.2 million, changed little.

Among the major worker groups, the unemployment rates for adult men (3.5 percent), adult women (3.6 percent), teenagers (12.8 percent), Whites (3.4 percent), Blacks (6.3 percent), Asians (3.0 percent), and Hispanics (4.7 percent) showed little or no change in August.

The number of long-term unemployed (those jobless for 27 weeks or more) was little changed in August at 1.3 million and accounted for 21.5 percent of the unemployed. Over the year, the number of long-term unemployed has declined by 403,000.

Both the labor force participation rate, at 62.7 percent, and the employment-population ratio, at 60.3 percent, declined by 0.2 percentage point in August

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.4 million, changed little over the month but was down by 830,000 over the year. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In August, 1.4 million persons were marginally attached to the labor force, little different from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. (See table A-16.)

Among the marginally attached, there were 434,000 discouraged workers in August, essentially unchanged from a year earlier. (Data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.0 million persons marginally attached to the labor force in August had not searched for work for reasons such as school
attendance or family responsibilities

Establishment Survey Data

Total nonfarm payroll employment increased by 201,000 in August, in line with the average monthly gain of 196,000 over the prior 12 months. Over the month, employment increased in professional and business services, health care, wholesale trade, transportation and warehousing, and mining.

Professional and business services added 53,000 jobs in August and 519,000 jobs over the year.

In August, health care employment rose by 33,000, with job gains in ambulatory health care services (+21,000) and hospitals (+8,000). Health care has added 301,000 jobs over the year.

Wholesale trade employment increased by 22,000 in August and by 99,000 over the year. Durable goods wholesalers added 14,000 jobs over the month and accounted for about two-thirds of the over-the-year job gain in wholesale trade.

Employment in transportation and warehousing rose by 20,000 in August and by 173,000 over the past 12 months. Within the industry, couriers and messengers added 4,000 jobs in August.

Mining employment increased by 6,000 in August, after showing little change in July Since a recent trough in October 2016, the industry has added 104,000 jobs, almost entirely in support activities for mining.

Employment in construction continued to trend up in August (+23,000) and has increased by 297,000 over the year.

Manufacturing employment changed little in August (-3,000). Over the year, employment in the industry was up by 254,000, with more than three-fourths of the gain in the durable goods component.

Employment showed little change over the month in other major industries, including retail trade, information, financial activities, leisure and hospitality, and government.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.5 hours in August. In manufacturing, the workweek held steady at 41.0 hours, and overtime was unchanged at 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was 33.8 hours for the fifth consecutive month

In August, average hourly earnings for all employees on private nonfarm payrolls rose by 10 cents to $27.16. Over the year, average hourly earnings have increased by 77 cents, or 2.9 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.73 in August.

The change in total nonfarm payroll employment for June was revised down from +248,000 to +208,000, and the change for July was revised down from +157,000 to +147,000. With these revisions, employment gains in June and July combined were 50,000 less than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the
recalculation of seasonal factors.) After revisions, job gains have averaged 185,000 per month over the last 3 months.

Market Reaction

U.S. job growth accelerated in August and wages recorded their largest annual increase in nine years, the Labor Department said, strengthening views the economy was so far weathering an escalating trade war with China.

After the data, traders of U.S. short-term interest-rate futures kept their bets of two more rate hikes this year, with a further hike expected in June 2019. The probability of a second 2019 rate hike increased, but was still below 50 percent. [MMT/]

The S&P financial sector was flat, with only two of the 11 major S&P 500 sectors higher.

“Not a great number for equities even though the headline employment number was strong,” said Steven Englander, global head of G10 FX Research at Standard Chartered Bank, New York.

“Any number that suggests that the Fed will have to tighten out of inflation concerns, well, A: it is not priced into the equity market right now and B: for the usual sets of reasons you don’t want to think of it as an equity market positive. It brings forward the risk of cycle end.”

The Philadelphia SE Semiconductor index was up 0.71 percent, helped by gains in Broadcom and Marvell Technology after their encouraging forecasts.

The broader tech index was up 0.42 percent, as internet stocks rose after two days of losses. Facebook, Alphabet, Twitter and Snapchat-parent Snap Inc were up between 0.10 percent and 1.2 percent.

Investors also prepared for a fresh salvo of Sino-U.S. tariffs as a public comment period for proposed U.S. tariffs on an additional $200 billion worth of Chinese imports passed at midnight ET (0400 GMT). The tariffs could now go into effect at any moment, although there was no clear timetable, and Beijing has said it would retaliate.

At 10:02 a.m. ET the Dow Jones Industrial Average was down 67.99 points, or 0.26 percent, at 25,927.88, the S&P 500 was down 3.10 points, or 0.11 percent, at 2,874.95 and the Nasdaq Composite was up 17.23 points, or 0.22 percent, at 7,939.96.

Declining issues outnumbered advancers for a 2.06-to-1 ratio on the NYSE and advancing issues outnumbered decliners for a 1.03-to-1 ratio on the Nasdaq.

A 0.29 percent drop in energy stocks, as oil prices slipped, led the decliners among the S&P sectors. [O/R]

Broadcom was up 6.5 percent, the most on the S&P, after its current-quarter revenue forecast largely beat estimates on strong data center demand and expectations of a boost from a new Apple iPhone.

Marvell Technology rose 6.3 percent after raising its forecast for synergies around the Cavium acquisition, which, analysts said, removed risks about further growth.

Tesla slid 7.2 percent after the electric carmaker said its chief accounting officer resigned and Bloomberg reported Chief People Officer Gaby Toledano was also to leave.

The S&P index recorded 13 new 52-week highs and 14 new lows, while the Nasdaq recorded 48 new highs and 40 new lows.

Nonfarm Payroll (NFP) Report

The Nonfarm Payroll (NFP) report is released on  the first Friday of every month at 8:30 AM ET (Eastern Time) by the U.S. Bureau of Labor Statistics. NFP is a highly anticipated economic report which signals the strength of the US economy. It reveals the health of the jobs market, which filters down into inflation

It is closely analysed to predict Gross Domestic Product (GDP) growth and inflation rates and has the power to move global financial markets.

Economic indicators in the NFP report that markets and policy makers care about the most are Non-Farm Employment Change, Average Hourly Earnings and the Unemployment Rate:

Non-Farm Employment Change

Non-Farm Employment Change measures change in the number of employed people during the previous month, excluding the farming industry. Job creation is an important leading indicator of consumer spending, which accounts for a majority of overall economic activity

Average Hourly Earnings

The wages growth data, Average Hourly Earnings, measures change in the price businesses pay for labor, excluding the farming industry. It’s a leading indicator of consumer inflation – when businesses pay more for labor the higher costs are usually passed on to the consumer;

Unemployment Rate

Unemployment Rate measures the percentage of the total work force that is unemployed and actively seeking employment during the previous month.

Although it’s generally viewed as a lagging indicator, the number of unemployed people is an important signal of overall economic health because consumer spending is highly correlated with labor-market conditions.

Unemployment is also a major consideration for those steering the country’s monetary policy, especially the Federal Open Market Committee, FOMC.

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