Despite the Good Report of 130,000 Jobs, the Economy’s Pace Is Worrisome

Despite the Good Report of 130,000 Jobs, the Economy’s Pace Is Worrisome


The great American jobs are showing signs of cracks as the trade war with China intensify and a global slowdown of the economy. The Labor Department released employment data on Friday, displaying that the US job market witnessed the addition of 130,000 jobs in August. However, this number is below what the analysts had expected. This number would have been much lower been it not for the addition of 25,000 temporary census workers.

As per Jeff Cox, [Source (1)]

“The increase fell short of Wall Street estimates for 150,000, while the unemployment rate stayed at 3.7%, as expected. An alternative measure of the jobless rate, which includes discouraged and underemployed workers, increased to 7.2% from 7% in July, due mainly to a 397,000 increase in those working part-time for economic reasons.”

Despite the Good Report of 130,000 Jobs, the Economy's Pace Is Worrisome

As per Nelson D. Schwartz, [Source (2)]

“The figures show that the economy continues to add jobs but at a more modest pace as the trade war intensifies and global growth slows.”

The unemployment rate has remained stable at 3.7% and the economy has gained jobs for 107 consecutive months. Nonetheless, the pace of hiring has slowed drastically. The United States has added a monthly average of 223,000 jobs in 2018 while for 2019 it is only 158,000 this year.

On the bright side, the wages rose at a healthy clip at 3.2% over the past year, and people who had not been looking for work returned to the job market.

As per Anneken Tappe, [Source (3)]

“The African-American unemployment rate fell dramatically to 5.5% from 6%. That was a record low for the data, which have been collected since 1972. The decline was led by a sharp drop in the unemployment rate for black women.

Hispanic unemployment fell to 4.2% from 4.5%. The race-based unemployment rate is a sometimes volatile number.”

The deceleration was rather steep for the private sector as they added just 96,000 jobs, from earlier in the year.

Economy’s Weakness Is Discernible

Although the employment picture is solid on the whole, weaknesses are beginning to show. The movement in the bond market, new evidence of weaker growth in Asia and Europe and the trade war have mounted the worries about a potential recession. Adding to the worry is that the stimulus from the tax cut enacted in late 2017 is fading.

The direct impact of the trade war was noticed in the manufacturing sector causing a hiring uncertainty in sectors feeling the effects of tariffs. The US manufacturing sector has tapered for the first time in 3 years, restricting the number of jobs by 50%. In the last month, the sector accommodated only 3000 jobs, below expectations – half this year’s average of 6,000 and less than a quarter compared with the July figure. In 2018, manufacturing job growth recorded averaged 22,000 jobs per month.

Employment Standing In Different Industries

Based on the August jobs data recession is not imminent. The participation of the labor force, for example, has also increased, rising to 63.2% and tying its highest level since August 2013. This suggests that workers who had been on the side-lines are slowly being led back into the labor market.

As per Nelson D. Schwartz, [Source (2)]

“Our labor market is in quite a strong position,” the Federal Reserve chair, Jerome H. Powell, said on Friday in Zurich. “Today’s labor market report is very much consistent with that story.”

The biggest advantages for August came from –

  • Professional and business services increased by 37,000
  • The federal government, added 28,000 workers in advance, for the 2020 population count
  • Health care contributed 24,000 to the total and
  • Financial services increased by 15,000

However, trade, transportation, and utilities had to forgo 11,000 jobs, and the mining and logging lost 5,000 positions.

Additionally, the total number of Americans, who are considered employed has gone up by 590,000 to a record of 157.9 million, according to the household survey, which is conducted separately from the headline establishment count. The ratio of Americans between the prime working ages of 25 and 54 who have a job hit 80% in August, which is the best showing in the current expansion.

Watching the Fed

The Federal Reserve cut its benchmark interest rates in July, by a quarter of a percentage point, for the first time in a decade. There are also rising expectations that the Fed will cut interest rates later this month, the second time this year by another quarter-point when policymakers meet on September 14th.

Although the report presented was weak and makes a case for a rate cut this month, some traders feel that it was not weak enough to suggest that the policymakers will go for a half-point reduction.

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