Nonfarm Payrolls: +156,000 month-over-month (Cons: +180,000), +2.10 million year-over-year
Unemployment Rate: 4.4% (Cons: 4.3%), +0.1 ppt month-over-month, -0.5 ppt year-over-year
Weekly Hours: 34.4 hours (Cons: 34.5 hours), down 0.1 hours month-over-month, up 0.1 hour year-over-year
Hourly Earnings: $26.39, +0.1% month-over-month (Cons: +0.2%), +2.5% year-over-year
Private payroll additions were a healthy 165,000 in August which was slightly below the 12-month average of 174,000 monthly private payroll gains. The unemployment rate ticked up slightly compared to July, but remains down 0.5 ppt year-over-year.
We have expected since early 2016 that the level of monthly payroll additions would gradually come down over time, simply due to the progress that has been made in the U.S. labor markets since the financial crisis. To put it simply, labor markets are maturing in a normal, cyclical fashion. August’s report revealed that payroll gains are slowly decelerating, but we acknowledge that there is still room for more payroll additions and an even greater reduction in the unemployment rate in the coming quarters, all else equal.
Despite the reduction in the unemployment rate from 10.0% in 2009 to 4.4% currently, average hourly earnings growth has remained subdued (up 2.5% year-over-year). Typically a maturing labor market leads to higher wages. Structural factors in today’s labor markets such as a lower participation rate, age demographics within the labor force, globalization and technology may be stunting average hourly earnings growth.
Even with the sluggish average hourly earnings growth, inflation in the U.S. has also remained subdued meaning that workers’ real incomes aren’t falling behind. Additionally, the aggregate income created by the large number of payroll additions has been and will continue to be a key factor in driving aggregate U.S. consumption growth.