August Job Growth Disappoints; Manufacturing Leads Employment Gains

Roy Maurer By Roy Maurer September 1, 2017
August Job Growth Disappoints; Manufacturing Leads Employment Gains

The U.S. economy created an estimated 156,000 jobs in August, considerably lower than forecast, but unemployment and labor force participation remained steady and the sectors most in need of an employment boost led the way in job growth.

The results from the U.S. Bureau of Labor Statistics (BLS) fell below economists' projections, which had predicted an addition of about 180,000 jobs, and the monthly report from ADP, which had estimated private-sector employment up by 237,000 jobs.

"I'm surprised by the 156,000 number," said Cathy Barrera, the chief economic advisor for online jobs platform ZipRecruiter, based in Santa Monica, Calif. "That being said, the overall numbers in the report look good. I don't want to discount the headline number, but I tend to pay more attention to the household side [unemployment and participation] because that reflects better how families are doing and how they are feeling in the labor market."

The unemployment rate, at 4.4 percent, was little changed in August, and the labor force participation rate, at 62.9 percent, has shown little movement over the past year, indicating a plateauing labor market.

"This isn't bad news," Barrera said. "We're not seeing much movement on many of these numbers, which isn't a bad thing since they've been so strong for the past four to five months, particularly with unemployment."

The unemployment rate has been steadily falling since a peak of 10 percent in 2009, at the height of the Great Recession. In August, the unemployment rates for adult men (4.1 percent), adult women (4.0 percent) and teenagers (13.6 percent) showed little or no change. There was also minimal change among individuals who are Asian (4.0 percent), black (7.7 percent), Hispanic (5.2 percent) and white (3.9 percent).

The number of long-term unemployed—who have been jobless for 27 weeks or more—dropped a tick to 1.7 million and accounts for 24.7 percent of the unemployed.

The number of individuals categorized as involuntary part-time workers—seeking full-time employment but working part time—held at 5.3 million in August.

Additionally, 1.5 million people were considered marginally attached to the labor force; they are unemployed but want and are available to work, and had looked for a job sometime in the previous 12 months. Among this group, 448,000 individuals were considered discouraged—not currently looking for work because they believe no jobs are available for them.

The remaining 1.1 million people marginally attached to the labor force in August had not searched for work in the past month for reasons such as school attendance or family responsibilities, according to the BLS.

"For prime working-age people, the labor force participation rate has almost fully recovered since before the recession," Barrera said. "But it's a totally different story when you look at people ages 16-24. They are about 5 percent off from where they were. To me, that's showing where the slack is—how many people may be waiting on the sidelines because they haven't found a favorable job market, and how many more might come back if wages go up and jobs are more available."

Average hourly earnings rose by 3 cents in August to $26.39, after rising by 9 cents in July. Over the past 12 months, average hourly earnings have increased by 65 cents, or 2.5 percent.

"The wage growth is lower than what we would normally expect for a labor market that has such a low unemployment rate," Barrera said. "That leads us to think there may be more slack than that unemployment rate is saying. We're seeing that the bottom quartile of wage earners is growing faster than the third quartile. That's good news—that's an indication that we're seeing a tightening in the bottom part of the labor market, which includes people who are less experienced and young people coming out of school looking for their first job."

Jed Kolko, chief economist for job search engine Indeed, pointed out that lower-wage industries like leisure/hospitality and retail had minimal job gains in August. "But there was a bright spot—August job gains were led by mining, construction and manufacturing. The growth in blue-collar jobs, especially manufacturing, is good news for many workers and struggling local markets."

Manufacturing employment rose by 36,000 in August. The increase in factory jobs included gains in motor vehicles and parts (14,000 jobs), fabricated metal products (5,000 jobs), and computer and electronic products (4,000 jobs). The sector has added 155,000 jobs since a recent employment low in November 2016.

In August, construction employment rose by 28,000, after showing little change over the prior five months. Employment among residential specialty trade contractors edged up by 12,000 over the month.

Employment in professional and technical services continued to trend up in August

(22,000 jobs), as has health care employment (20,000 jobs) and mining (7,000 jobs), which had been beleaguered over the past year.

Employers Will Need to Get More Creative

The tightening labor market will pressure many employers to get more creative and strategic in their attempts to find qualified candidates for high-skilled positions, said Rebecca Henderson, CEO of global talent acquisition, consulting and outsourcing firm Randstad Sourceright, headquartered in Amsterdam.

"We are already seeing the rapid adoption of human resource technology to overcome the scarcity of skilled talent," she added. "According to our most recent survey of U.S. employers, more than half report making moderate to significant investments in new recruitment and talent management technologies, like advanced online candidate assessment tools and dashboards that help recruiters better interpret HR analytics. As unemployment continues to contract, I think we will see even more use of technology to identify and attract top talent."

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