Do Democrats really want to run on reversing December’s tax cut? The August job report beat expectations, as the US economy added 201,000 jobs last month and the U-3 unemployment rate held steady at 3.9%. Labor force measurements fell back, however, as the Household survey demonstrated even more instability in its measurements, and revisions cast a pall on the summer:
Total nonfarm payroll employment increased by 201,000 in August, and the unemployment rate was unchanged at 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in professional and business services, health care, wholesale trade, transportation and warehousing, and mining.
The unemployment rate remained at 3.9 percent in August, and the number of unemployed persons, at 6.2 million, changed little. (See table A-1.)
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 good news on job creation gets significantly tempered by the downward revisions for the last two months. Those took 50,000 jobs off the books for the summer, lowering June’s total to 208K and July’s to 147K. Even with the rebound in August to 201K, the summer didn’t deliver on the promises of May.
Furthermore, labor participation rates continue to go in the wrong direction. Both the employment-population ratio and the labor force participation rate went down by two-tenths of a point in August despite the increase in jobs, and despite the sudden drop in the civilian work force from the Household survey. For instance, the civilian labor force dropped by an unbelievable 469,000 people and the number of employed within it dropped by 423,000, while those not in the labor force at all rose by 692,000 in a single month. Something is seriously off in the Household survey process, and it’s not the first time that’s been obvious.
The Establishment data is much more stable, which is where we get the jobs-added data, although it tends to be preliminary. (Hence the rolling two-month revisions.) The news there is better than last month but still hardly spectacular. Wages grew by 0.4% over July, a better-than-average increase that may get a little dented from inflation. Manufacturing dragged, which isn’t good news for Donald Trump among his Midwest and Rust Belt constituencies, but it’s still good news overall as it shows continued expansion above the maintenance level needed for population growth.
Bloomberg’s Sho Chandra sees it as a net positive, and gives credit to the tax cut in December:
U.S. job gains rebounded by more than forecast in August and wages unexpectedly registered their biggest advance of the expansion, keeping the Federal Reserve on track to lift interest rates this month and possibly another time this year.
Nonfarm payrolls rose 201,000 after a downwardly revised 147,000 advance, a Labor Department report showed Friday. The median estimate of analysts surveyed by Bloomberg called for a gain of 190,000 jobs. Average hourly earnings increased 2.9 percent from a year earlier while the jobless rate was unchanged at 3.9 percent, still near the lowest since the 1960s. …
Average hourly earnings rose 0.4 percent from the prior month following a 0.3 percent gain, the report showed. The annual gain followed a 2.7 percent advance in July.
A separate measure, average hourly earnings for production and non-supervisory workers, increased 2.8 percent from a year earlier, after a 2.7 percent gain.
Christopher Rugaber highlighted momentum coming into the fall for the AP, and also gave credit to the tax cuts for the growth:
Hiring picked up in August as U.S. employers added a strong 201,000 jobs, a sign of confidence that consumers and businesses will keep spending despite the Trump administration’s conflicts with U.S. trading partners.
The Labor Department said Friday that the unemployment rate remained 3.9 percent, near an 18-year low.
Americans’ paychecks grew at a faster pace in August. Average hourly wages rose last month and are now 2.9 percent higher than they were a year earlier, the fastest year-over-year gain in eight years. Still, after adjusting for inflation, pay has been flat for the past year.
The economy is expanding steadily, fueled by tax cuts, confident consumers, greater business investment in equipment and more government spending. Growth reached 4.2 percent at an annual rate in the April-June quarter, the fastest pace in four years.
It’s not spectacular, but it’s certainly good news. It’s clear that the tax cuts have a large role in job creation, which should give Republicans a very clear advantage in the political argument for the midterms. One has to wonder, though, whether the trade wars might have stepped on some growth — and stepped on the effectiveness of the economic argument. Still, Republicans should put their focus on the tax cuts and the damage that will result from a rollback while the evidence is fresh for their side.