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Economy in Brief

U.S. Job Growth Recovered Some, Unemployment Rate Fell
by Tom Moeller September 3, 2004

Nonfarm payrolls grew 144,000 last month following upwardly revised gains in both July & June which averaged 84,500 each month. Consensus expectations had been for a 150,000 job gain in August.

The fall in the unemployment rate to 5.4% from the separate household survey continued to suggest moderate labor market improvement. Employment growth eased to 21,000 (1.4% y/y) following a 629,000 rise the prior month and the labor force fell 152,000 (+0.7% y/y). The labor force participation rate slipped back to 66.0% from 66.2% in July.

Hiring in private service producing industries recovered modestly last month with an 84,000 (1.7% y/y) gain versus an upwardly revised 45,000 July rise, however, these gains are a fraction of the growth during the prior several months. Hiring in the financial sector did recover 18,000 m/m (0.8% y/y), but jobs in information services fell 10,000 (-0.3% y/y) and another 11,300 (+0.8% y/y) retailing jobs were lost. Hiring in professional & business services grew 32,000 (3.4% y/y) and temporary help services jobs rose 9,800 (8.9% y/y).

Factory sector payrolls grew 22,000 (0.1% y/y) following a downwardly revised gain in July. Construction sector hiring grew 15,000 (2.8% y/y).

The breadth of increase amongst private non-farm payrolls confirmed modest job growth at 54.5% versus an upwardly revised 54.9 in July. The three month diffusion index of hiring fell to 57.9 versus a high of 74.5 in May.

The index of aggregate hours worked (employment times hours worked) grew 0.2% following an upwardly revised 0.7% July rise. The index so far in the third quarter is 2.8% (AR) above 2Q which rose a revised 2.2% (AR) versus 1Q.

Average hourly earnings rose 0.3% (2.3% y/y) following an upwardly revised 0.4% July gain.

Employment Aug July Y/Y 2003 2002 2001
Payroll Employment 144,000 73,000 1.3% -0.3% -1.1% 0.0%
  Manufacturing 22,000 6,000 0.1% -4.8% -7.2% -4.8%
Average Weekly Hours 33.8 33.8 33.6 33.7 33.8 34.0
Average Hourly Earnings 0.3% 0.4% 2.3% 2.7% 2.9% 3.8%
Unemployment Rate 5.4% 5.5% 6.1% 6.0% 5.8% 4.8%
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