The labor market continued to make progress in August, but it has a long way to go for a full recovery. Here are the five things we learned from U.S. economic data released during the week ending September 4.
Employers added workers again in August, but the pace moderated. The Bureau of Labor Statistics estimates nonfarm payrolls grew by a seasonally adjusted 1.371 million workers during the month. Payrolls have swelled by 10.611 million after bottoming out in April, but August’s advance was the smallest of the past four months. Employment remained a startling 11.549 million smaller than they were in February. 251,000 of these new jobs are temporary positions to support the 2020 Census, most of which will disappear by the end of this month. Private-sector payrolls expanded by 1.027 million (following gains of 4.729 million and 1.481 million in May and June, respectively), split by 43,000 additions in the goods-producing side of the economy and 984,000 in the service sector. Industries reporting the significant job gains include retail (+248,900), professional/business services (+197,000, including 106,700 in temporary help services), leisure/hospitality (+174,000), health care/social assistance (+90,100), and transportation/warehousing (+78,000). Local government employment (net of education) grew by 63,300 but remained 386,200 below year-ago levels.
The separate survey of households has the unemployment rate plummeting by 1.8 percentage points to 8.4 percent. While well below its April peak of 14.7 percent, the unemployment rate was more than double February’s 3.5 percent reading. People continued to reentering the job market as the labor force grew by 968,000. The labor force participation rate also continued its recovery, adding 3/10ths of a percentage point to 61.7 percent (August 2019: 63.2 percent). The 25 to 54 labor force participation rate edged by 1/10th of a point to 81.4 percent (August 2019: 82.6 percent). The count of “involuntary” part-time workers shrank by 871,000 to 7.572 million (August 2019: 4.381 million) while the median length of unemployment swelled by 1.7 weeks to 16.7 weeks (August 2019: 9.0 weeks). The broadest measure of labor underutilization by the BLS (the U-6 series) dropped by 2.3 percentage points to 14.2 percent (August 2019: 7.2 percent). One last factoid from the August report: the percentage of employed people who are teleworking dropped by 2.1 percentage points to 24.3 percent. In May, this same measure was at 35.4 percent.
Factory orders jumped in July. The Census Bureau reports that new orders for manufactured goods rose 6.4 percent during the month to a seasonally adjusted $466.1 billion. Durable goods orders surged 11.4 percent while that for nondurable goods gained 1.8 percent. Transportation goods orders swelled 35.7 percent (including a 9.4 percent bump for motor vehicles). Net of transportation goods, orders advanced 2.1 percent. Shipments jumped 4.6 percent (to $479.5 billion), split between gains for durable and nondurable goods of 7.3 percent and 1.8 percent, respectively. Just to highlight the damage to manufacturing inflicted earlier this year, new orders over the first seven months of 2020 were 9.6 percent below that of the same period of 2019 while the same seven-month comparable for shipments was -8.3 percent.
Purchasing managers report manufacturing activity accelerated in August. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, added 1.8 points during July to a reading of 56.0. The PMI has been above a reading of 50.0—indicative of an expanding manufacturing sector—for three straight months. Improving were indices for new orders, employment, and production. Falling was the inventories indicator. A 2.4 point increase for the supplier deliveries measure signaled that manufacturers continued to face supply chain challenges. Fifteen of 18-tracked manufacturing industries expanded in August, led by wood products, plastics/rubber products, and food/beverages. The press release noted that companies in three sectors—aerospace equipment, office furniture/commercial office building, and oil/gas markets—reported “low demand.”
The service sector also expanded for a third consecutive month. The Services PMI, also from the Institute for Supply Management, pulled back by 1.2 points in August to a reading of 56.9. Much like with the manufacturing sector, the Services PMI has been above a reading of 50.0 for three straight months. Index components for both business activity and new orders fell sharply, while the employment index rose. Purchasing managers also reported slow deliveries from suppliers. Fifteen of 18 service sector industries reported growth in August, led by arts/entertainment/recreation, health care/social assistance, and utilities. The press release indicated that survey respondents were “most optimistic” but also noted “a challenge with capacity and logistics.”
Exports, imports, and the trade deficit all bloomed in July. The Census Bureau and Bureau of Economic Analysis report that exports jumped 8.1 percent to $168.1 billion (-20.1 percent versus July 2019) while imports rose 10.9 percent to $231.7 billion (-11.4 percent versus July 2019). The resulting trade deficit of -$63.6 billion was up 18.9 percent for the month and 24.5 percent from a year earlier. The goods deficit surged by $9.3 billion to -$80.9 billion while the services surplus narrowed by $0.8 billion to +$17.4 billion. Growing significantly were exports of automobiles, consumer goods, industrial supplies/materials (including crude oil), and capital goods. Rising were imports of cars, industrial supplies/materials, capital goods (including civilian aircraft), and consumer goods (including cell phones).
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending August 29, First-Time Claims, seasonally adjusted): 881,000 (-130,000 vs. the previous week, +662,000 vs. the same week a year earlier). 4-week moving average: 991,750 (+357.6% vs. the same week a year earlier).
- Construction Spending (July 2020, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.365 trillion (+0.1% vs. June 2020, -0.1% vs. July 2019).
- Productivity (Q2 2020-revised, Nonfarm Labor Productivity, seasonally adjusted annualized rate): +10.1% vs. Q4 2019, +2.8% vs. Q1 2019.
- Beige Book
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