While the NBER has declared that the recession ended in April 2020, neither the King nor Queen of Coincident Indicators, industrial production, and jobs, have recovered to their pre-pandemic levels. The former is only off by -0.2%, but the latter – which is most important to ordinary Americans – as of this morning’s report is still -3.5% below its level in February 2020.
While this morning’s report came in well short of expectations, with the big positive revision to last month’s blockbuster report, which I’ll get into more detail about below, the 6 month average of monthly gains is still over 600,000.
Here’s my synopsis of the report:
- 235,000 jobs added. Private sector jobs actually added a little more, but government (mainly education) shed -8,000 jobs, having a great deal to do with haywire seasonal adjustments this year. The alternate, and more volatile measure in the household report indicated a gain of 509,000 jobs, which factors into the unemployment and underemployment rates below.
- The total number of employed is still -5,568,000, or -3.5% below its pre-pandemic peak. At this rate jobs have grown this year, it will take another 9 months for employment to completely recover.
- U3 unemployment rate declined -0.2% to 5.2%, compared with the January 2020 low of 3.5%.
- U6 underemployment rate declined -0.4% to 8.8%, compared with the January 2020 low of 6.9%.
- Those not in the labor force at all, but who want a job now, declined -835,000 to 5.682 million, compared with 5.010 million in February 2020.
- Those on temporary layoff increased 13,000 to 1,252,000.
- Permanent job losers declined -443,000 to 2,487,000.
- June was revised upward by 24,000, while July was revised upward by 110,000, for a net gain of 134,000 jobs compared with previous reports.
Leading employment indicators of a slowdown or recession
These are leading sectors for the economy overall and will help us gauge how strong the rebound from the pandemic will be. These were mixed, with a preponderance negative:
- the average manufacturing workweek declined -0.2 hours to 40.3 hours. This is one of the 10 components of the LEI.
- Manufacturing jobs increased 37,000. Since the beginning of the pandemic, manufacturing has still lost -378,000 jobs, or -3.0% of the total.
- Construction jobs declined -3,000. Since the beginning of the pandemic, -232,000 construction jobs have been lost, or -3.0% of the total.
- Residential construction jobs, which are even more leading, rose by 100. Since the beginning of the pandemic, 40,900 jobs have been *gained* in this sector, or 4.9%.
- temporary jobs declined by -5,800. Since the beginning of the pandemic, there have still been 262,200 jobs lost, or -8.9% of all temporary jobs.
- the number of people unemployed for 5 weeks or less decreased by 174,000 to 2,083,000, which is exactly 1,000 higher than just before the pandemic hit.
- Professional and business employment increased by 74,000, which is still -468,000, or about -2.2%, below its pre-pandemic peak.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel: rose $0.14 to $25.99, which is a 4.8% YoY gain. This continues to be excellent news, considering that a huge number of low-wage workers have finally been recalled to work.
Aggregate hours and wages:
- the index of aggregate hours worked for non-managerial workers rose by 0.2%, which is a loss of -3.1% since just before the pandemic.
- the index of aggregate payrolls for non-managerial workers rose by 0.7%, which is a gain of 4.9% since just before the pandemic.
Other significant data:
- Leisure and hospitality jobs, which were the most hard-hit during the pandemic, was completely unchanged, and is still -1,699,000, or -10.0% below their pre-pandemic peak.
- Within the leisure and hospitality sector, food and drink establishments declined -41,500, and is still -966,300, or -7.9% below their pre-pandemic peak.
- Full time jobs declined -30,000 in the household report.
- Part time jobs increased 423,000 in the household report.
- The number of job holders who were part time for economic reasons declined by 14,000 to 4,469,000, which is an increase of 71,000 since before the pandemic began.
As frequently happens, the messages of the Establishment report, which asks businesses about hiring, and the Household report, which asks individuals about being employed, were quite different. Despite the relative weakness in the former, overall this month’s jobs report was quite positive, as it continues existing good trends this year.
To begin with, July’s excellent 943,000 gain was revised higher to 1,053,000. Combined, July and August averaged 644,000/month, which is right in line with the average gains this year. In short, the strong trend in job gains is intact. Further, as was anticipated, this month’s report was distorted to the downside by losses in education. Seasonally August is when educators get rehired, but this year much of the gains were in June and July – so the seasonal adjustments paid us back to the downside in August.
The issue with labor and hospitality is murkier. The stalling out in gains, and losses in food and drink establishments, might also reflect distortions of seasonality this year, or they might reflect impacts from Delta, or some of each.
Meanwhile, the 509,000 gain in jobs from the Household report, together with a slight increase in the labor force, caused all of the unemployment-related indicators to continue to decline. The unemployment rate is where it was in 2015, and the broader underemployment rate where it was in 2017, as is the even broader number of those outside of the labor force but who want a job.
This is not bad at all
Finally, wages for ordinary workers continue to increase at a strong rate. The issue is whether those gains will continue to be gobbled up by supply-bottleneck-induced inflation.