Payrolls continued to grow in August, but the pace of hiring slowed. Here are the five things we learned from U.S. economic data released during the week ending September 3.
Hiring wobbled in August. Nonfarm employers added a seasonally adjusted 235,000 workers during the month, down from gains of 943,000 in June and 1.053 million in July (both upwardly revised from their previously reported levels). The Bureau of Labor Statistics measure remained 3.918 million below its February 2020 peak. August’s weakness is the result of both the Delta variant and employer difficulties in finding qualified candidates for their historically large number of job openings. Private sector employers added 243,000 workers, split by 40,000 workers in the goods-producing side of the economy and 203,000 in the service sector. Industries adding the most workers in August were professional/business services (+74,000), transportation/warehousing (+53,200), manufacturing (+37,000), and education/health services (+35,000). Leisure/hospitality payrolls held steady in August after expanding by a total of 812,000 during the prior two months.
Based on a separate household survey, the unemployment rate fell to a pandemic low of 5.2 percent (off 2/10ths of a percentage point to 5.4 percent). The labor force expanded by 190,000 as the labor force participation held steady at 61.7 percent. The rate for adults 25 to 54 also remained at its July reading (81.8 percent). Also virtually unchanged was the count of part-time workers seeking a full-time opportunity (4.469 million), while the median length of unemployment shrank by a half-week to 14.7 weeks. The broadest measure of labor underutilization (the “U-6” series) dropped by 4/10ths of a percentage point to a pandemic low of 8.8 percent.
The service sector continued to expand in August… The Services PMI from the Institute for Supply Management lost 2.4 percent to a reading of 61.7. Even with the decline, the measure has remained above a reading of 50.0 (signaling an expanding service sector) for 15 straight months. All the Services PMI components declined during the month, including business activity/production, new orders, employment, and inventories. Seventeen of 18 service sector industries expanded in August, led by accommodation/food services, retail, and construction. The press release noted “growth remained strong” but that the “tight labor market, materials shortages, inflation, and logistics issues continued to cause capacity constraints.”
…as had the manufacturing side of the economy. The Manufacturing PMI added 4/10ths of a point to a reading of 59.5. Like above, the Institute for Supply Management measure has been above a critical 50.0 mark for 15 consecutive months. Components that positively contributed to the Manufacturing PMI included new orders, production, and inventories. The employment measure, however, fell to a contractionary reading. Fifteen of 18 manufacturing industries expanded in August, led by furniture, computers/electronics, and machinery. The press release noted that many manufacturers struggle with hiring “and a clear cycle of labor turnover as workers opt for more attractive job conditions.”
Factory orders grew at a slower rate in July. The Census Bureau reports that new orders for manufactured goods increased for the 14th time in 15 months with a 0.4 percent gain to a seasonally adjusted $508.1 billion. Durable goods orders slipped 0.1 percent (pulled down by declining civilian aircraft orders), while those for nondurables rose 0.9 percent. Factory orders for the first seven months of 2021 were 18.0 percent ahead of those for the same months in 2020. Shipments jumped 1.6 percent to $508.5 billion (also its 14th advance over the past 15 months). Durable goods shipments surged 2.2 percent while those of nondurables increased 0.9 percent. Unfilled orders grew for the 6th straight month (+0.3 percent to $1.226 trillion) while inventories swelled for the 13th time to 14 months (+0.5 percent to $744.4 billion).
Consumer sentiment took a big hit in August. The Conference Board’s Consumer Confidence Index lost 11.3 points during the month to fall to its lowest points since February at 113.8 (1985=100). The present conditions index last 9.9 points to 147.2 while the expectations measure plummeted by 12.4 points to 91.4. One in five survey respondents viewed current business conditions as “good,” while 24.0 percent saw them as “bad.” Only 22.9 percent of consumers anticipate the economy will improve over the next six months, while 17.8 percent expect a deterioration. The press release links the “resurgence in COVID-19 and inflation concerns” to the drop in confidence but also notes “it is too soon to conclude” that consumers will cut back on spending.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending August 28, 2021, First-Time Claims, seasonally adjusted): 340,000, -14,000 vs. the previous week, -535,000 vs. the same week a year earlier). 4-week moving average: 355,000 (-60.0% vs. the same week a year earlier).
- International Trade (July 2021, Goods and Trade Deficit, seasonally adjusted): -$70.1 billion (vs. June 2021: -$73.2 billion; July 2020: -$60.7 billion).
- Productivity (2021Q2, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): +2.1% vs. 2021Q1, +1.8% vs. 2020Q2.
- Construction Spending (July 2021, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.569 trillion (+0.3% vs. June 2021, +9.0% vs. July 2020).
- Vehicle Sales (August 2021, Light Trucks and Automobiles, seasonally adjusted annualized rate): 10.043 million (-10.2% vs. July 2021, -20.0% vs. August 2020).
- Pending Home Sales (July 2021, Index (2001=100), seasonally adjusted): 110.7 (-1.8% vs. June 2021, -8.5% vs. July 2020).
- FHFA House Price Index (June 2020, Purchase-only, seasonally adjusted): +1.6% vs. May 2021, +18.8% vs. June 2020.
- S&P CoreLogic Case-Shiller Home Price (June 2021, 20-City Index, seasonally adjusted): +1.8% vs. May 2021, +18.6% vs. June 2020).
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What We Learned About the U.S. Economy Last Week 