Strong U.S. Labor Market Continues to Grow

Unemployment rate unchanged at low 3.9 percent, wage growth improves

Roy Maurer By Roy Maurer September 7, 2018
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The U.S. jobs engine keeps on churning. Employers added over 200,000 new jobs in August, again surpassing economists' expectations in a nearly eight-year long consecutive streak of positive monthly jobs reports issued by the Bureau of Labor Statistics.

The unemployment rate stayed at 3.9 percent, an 18-year low, and wages picked up, indicating that employers may be feeling the pressure to increase salary offers in this very tight labor market.

"This is an incredibly exciting report and shows the continued strength of this recovery," said Martha Gimbel, research director for Indeed's Hiring Lab, the labor market research arm of the global job search engine. "The economy continues to grow at a pace one would not have expected a few years ago given how far we are into this economic recovery."

"Broadly speaking, today's job market remains the strongest in a generation of U.S. job seekers," said Andrew Chamberlain, chief economist at Glassdoor. "With more than 6.6 million open jobs in the U.S. today, demand for talent remains strong and shows few signs of slowing."

But robust jobs gains have led to acute talent shortages in the U.S., said Becky Frankiewicz, president of ManpowerGroup North America, a leading workforce solutions company.   

"We continue to see increasing demand for skilled workers across all sectors of the economy, with 46 percent of employers struggling to fill open positions, especially across manufacturing, construction and retail," she said.

Sectors showing strong jobs gains in August include:

  • Professional and business services (53,000 new jobs).
  • Health care (33,000).
  • Construction (23,000).
  • Wholesale trade (22,000).
  • Transportation and warehousing (20,000).
  • Leisure and hospitality (17,000).

"The sector with the weakest job market in August was information, which includes most traditional media jobs," Chamberlain said. The information sector lost 6,000 jobs last month.

Employment losses in August were also recorded in retail trade (-5,900 jobs), government (-3,000 jobs) and manufacturing (-3,000 jobs).

"Manufacturing weakness was limited to autos, which may be a sign of trade tensions taking a toll," said Josh Wright, chief economist for recruitment software firm iCIMS. He added that iCIMS data shows job openings in medium-size manufacturers still rising, "so any impacts on employer confidence appear tightly contained for now."

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Wages Tick Up

In August, average hourly earnings rose by 10 cents to $27.16—up 2.9 percent from a year ago.

"The earnings data shows good news for employees, and signs of growing concerns for employers," said Marc Cenedella, CEO of Ladders, a careers site headquartered in New York City. "In a tightening employment market, employers are increasingly finding they need to pay more to attract and retain their workforce."

Wages increased in August at their fastest year-on-year pace since the Great Recession. "While it remains to be seen if that growth continues, it seems plausible that wage pressures are increasing," Gimbel said. "Looking at who got the wage growth this month, workers in both low- and middle-wage industries saw wage growth faster than their year-over-year pace."

Cathy Barrera, chief economist at online employment marketplace ZipRecruiter, remarked that while wage growth over the last year still lags behind historical rates for an unemployment rate around 4 percent, the uptick reflects anecdotal evidence that labor shortages are beginning to drive up wages for some types of blue-collar jobs in some geographic areas.

"In particular, jobs at the lower end of the wage spectrum and jobs with lower educational or experience requirements seem to have faster-climbing wages than others," she said.

One factor that has been contributing to lackluster wage growth is job turnover, Barrera continued. "While the unemployment rate is the lowest it has been in decades, the quit and hire rates are lower than they have been during past times of very low unemployment. This indicates some uncertainty among workers and employers about the labor market, such as how easy it will be to find a new job. It remains to be seen how high the wage growth rate will climb as a result of labor market tightening, labor shortages and increased mobility among workers." 

Labor Participation Falls

The nation's labor force shrank by 469,000 workers in August, with the labor participation rate dropping 0.2 percentage point to 62.7 percent. "That's likely due to sweeping demographic trends facing the economy, as a wave of Baby Boomers bow out of the job market for retirement," Chamberlain said.

The number of involuntary part-time workers in August was 4.4 million, down by 830,000 over the year. "The strength in job growth means that this year, the percentage of workers who want a full-time job but are stuck in a part-time job has seen remarkable improvement," Gimbel said. "It has fallen 0.4 percentage point this year, finally nearing its pre-recession low."

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