A Few Bright Spots Found in August Employment Report

U.S. employers advertised fewer jobs in August but the jobless rate hit a 4-1/2-year low, a mixed sign that suggests at best a modest improvement in the job market. The unemployment rate fell to 7.3 per cent, but only because more people gave up looking for work. The U.S. Labor Department doesn’t count someone as unemployed unless they are actively looking for work.

Employers added 169,000 net jobs in August, many fewer than previously thought in July and June, the government said Friday. Not only did hiring miss expectations last month, but the job count for June and July was also revised to show 74,000 fewer positions added than previously reported.

Hiring has fluctuated in recent months and is below the 5 million pace before the recession.

The latest data on job openings and turnover in the workforce reaffirmed the painfully slow but steady progress taking place over the past three years. The economy is adding jobs. But much of the improvement has come from a drop in layoffs — not rapid hiring.

The Job Openings and Labor Turnover report, released Tuesday, shows overall hiring levels as well as job openings, layoffs and quits. It provides greater detail than the monthly employment report.

Job openings fell in nearly all industries, including construction, retail, health care and government.

Fewer jobs have made it harder for the unemployed to find work. For example, in July there were 3.1 unemployed people competing for each open job. In a healthy economy the ratio is 2 to 1.

U.S. small businesses cut jobs for the fourth straight month in August, the National Federation of Independent Business said in a report that casts a shadow over recent signs of strength in the economy. The Nashville-based small business association said firms on average reduced their staff by 0.3 workers.

Construction employment also stagnated in August, while the industry unemployment rate fell and a majority of companies reported difficulty finding workers, according to an analysis of new government data and an industry survey by the Associated General Contractors of America.

“After a strong rebound in 2012, construction hiring and spending have been stuck in neutral through most of 2013,” said Ken Simonson, the association’s chief economist. “Yet the unemployment rate for former construction workers hit the lowest August level in five years, suggesting that experienced workers are leaving the industry rather than returning to it. As a result, firms are already having trouble finding workers.”

Consumer spending, home building, new home sales, durable goods orders and industrial production all weakened in July. The economy grew at a 2.5 percent annual pace in the April-June period. Many economists had expected an acceleration in momentum in the second half of the year.

However, we did find some bright spots in the jobs data.

Job openings rose in manufacturing, and hotels and restaurants.

Layoffs dropped to 1.5 million, the lowest level on record dating back to 2001.

Slightly more people quit their jobs, a positive sign that they are more confident in the job market. Most people don’t quit until they have a new job or believe they will be able to find one. The number of people quitting rose by 63,000 to 2.27 million in July. Still, in a strong economy 2.5 million to 3 million workers quit their jobs every month.

The private sector accounted for the bulk of the job gains last month, but government payrolls increased 17,000 as local governments hired teachers for the new school year.

Factory employment rebounded in August after falling in July.

August was another month of strong job gains in the retail sector. Leisure and hospitality employment also posted solid increases as did health care and social assistance.

Federal Reserve Chairman Ben Bernanke and Vice Chair Janet Yellen have both said that they are monitoring the job openings report for signs that hiring is improving in a sustainable way. When they started, they were looking at a jobless rate that stood at 8.1 percent.

While economists believe the Fed could still announce a tapering of its monthly bond purchases at its September 17-18 policy meeting, they said the weak data increases chances of a delay in reducing their $85 billion in monthly bond purchases. Fed policymakers are deeply divided about the timing of the move, but many economists expect them to begin tapering their purchases in September. The bond purchases have kept longer-term interest rates low, encouraging consumers and businesses to borrow and spend more

Michael Hanson, a senior economist at Bank of America Merrill Lynch in New York summed it up well when he said, “Given the data we have gotten so far, the third quarter is looking like it’s going to be on the soft side. The economy, I don’t think, has the momentum that many people, probably a number of Fed officials, were hoping for.”

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