August Jobs Report

Today is the first Friday of the month so, of course, that means today is jobs day as the Bureau of Labor Statistics released its monthly jobs report at 8:30.   After the economy added 200k jobs or more each of the last 7 months, a streak that hasn’t happened since 1997, economists were anxious to see if that streak could continue. Private payroll firm ADP earlier this week said private payrolls climbed 204k and market expectations for the jobs report were as follows:

• Payrolls: +230k
• Unemployment Rate: 6.1%
• Hourly Earnings: +0.2%
• Average Hours: 34.5

August’s report came in well below expectations, the lowest payroll gains of the year, at +142k jobs while the unemployment rate ticked down 0.1% to 6.1%. Here are the headline numbers:

• Payrolls: +142k
• Unemployment Rate: 6.1%
• Hourly Earnings: +0.2%
• Average Hours: 34.5

And here are some deeper numbers:

• Net Revisions: -28k
  • June -31k
  • July +3k
• Labor Force Participation Rate: 62.8% (down .1%)
• Household Survey: +16k
• U-6 Unemployment: 12.0% (Down from 12.2%)

Not dreadful, but disappointing. The labor market recovery still continues, but while we had hoped it had stepped up a gear, it hasn’t.

— Justin Wolfers (@JustinWolfers) September 5, 2014

The trend for a while now has been a steadily improving jobs market and while there were hopes for a major break out, moderate jobs growth has been the story for years now.

Every time it looks like the economy has broken out of its trend of producing 150-200k jobs, we’re disappointed. Lesson: Data are noisy.

— Justin Wolfers (@JustinWolfers) September 5, 2014

It is essential to remember that this report is the preliminary report and will be revised multiple times in the coming months. It is also just one data point that does nothing to change the long-term trend.

Despite disappointing report, no meaningful change in longer-run growth trend. pic.twitter.com/yGtUJWuhRh

— Ben Casselman (@bencasselman) September 5, 2014

This report is also a bit of a headscratcher as it is at odds with the majority of recent economic data. This could make August a candidate for major revisions or it could simply be an outlier. Remember, this data can be noisy with a margin of error of +/- 100,000 jobs.

This number is a classic NFP headscratcher. No preliminary data suggested it (ISM, ADP, claims), and August has a tendency to be revised up.

— Bespoke (@bespokeinvest) September 5, 2014

The headline unemployment number of 6.1% will be cited across the newswires all day today but the more meaningful unemployment number is the broader U-6 measure of unemployment that includes marginally attached workers and people who are looking for full time jobs but have to settle on part-time jobs for economic reasons. This is one of the bright spots on the report as U-6 fell 0.2% to 12.0%.

Make no mistake, this was a disappointing report to end the streak of 200k+ jobs gained per month. Bond yields plunged 1.64% upon release and stock futures actually rose. This is likely because the disappointing numbers in the jobs report increases the likelihood that interest rates will be held low for a longer period of time than before. However, month-to-month reports are volatile and this report is at odds with the majority of other economic data. This sums it up best:

This employment report will be revised up to seven times, with an average revision of 46,000 jobs. Be sure to have a major reaction to it.

— Downtown Josh Brown (@ReformedBroker) September 5, 2014