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Economy in Brief

Before Katrina, U.S. Payrolls On An Up Trend
by Tom Moeller September 2, 2005

August non-farm payrolls rose 169,000. The gain was shy of Consensus expectations for a 190,000 increase but increases in both July and June were revised upward to 242,000 and 175,000, respectively.

These job figures are the last before the devastating effects of Hurricane Katrina are tallied. Early estimates suggest that 500,000 to 750,000 workers will be absent from upcoming payroll counts as a result.

Factory sector payrolls fell further in August by 14,000, higher than the 9,000 average loss during the last twelve months. A diffusion index measuring one month change in factory payrolls of 45.8% indicates that job losses were widespread amongst industries. The twelve month diffusion dropped to 33.3%, indicating that only one third of manufacturing establishments have added to job counts during that period.

Private service producing industries payrolls increased 141,000 (2.1% y/y) in August following an upwardly revised 198,000 July gain. Professional & business services jobs rose 29,000 (3.1% y/y), education & health services rose 43,000 (2.3% y/y) and financial jobs rose 15,000 (2.3% y/y). The one month diffusion index of 57.2% indicated that job creation was fairly broad amongst industry.

Construction jobs jumped 25,000 (4.0% y/y) while total government employment rose 15,000 (0.8% y/y).

The unemployment rate from the household survey dropped to 4.9%, a four year low as employment rose 373,000 (2.0% y/y) and the labor force rose 268,000 (1.5% y/y). The labor force participation rate rose to 66.2%, the highest since July 2004.

The index of aggregate hours worked (employment times hours worked) rose 0.1% (2.4% y/y) after an upwardly revised 0.3% rise in July. The first two months of the third quarter stood 0.4% above the second. Hours worked in 2Q increased 2.8% (AR) from 1Q05.

Average hourly earnings rose a slight 0.1%.

Employment Aug July Y/Y 2004 2003 2002
Payroll Employment 169,000 242,000 1.7% 1.1% -0.3% -1.1%
  Manufacturing -14,000 -6,000 -0.8% -1.2% -4.9% -7.2%
Average Weekly Hours 33.7 33.7 33.7 33.7 33.7 33.8
Average Hourly Earnings 0.1% 0.4% 2.7% 2.1% 2.7% 2.9%
Unemployment Rate 4.9% 5.0% 5.4% 5.5% 6.0% 5.8%
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