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Economy in Brief

U.S. Payroll Growth Weakens But Earnings Strengthen & Jobless Rate Falls in August
by Tom Moeller  September 3, 2021

• Service-sector leads payroll slowdown.

• Average hourly earnings growth accelerates.

• Unemployment rate drops to lowest since March 2020.

Impacts from the Delta variant seem to have made their way into the latest jobs report. Nonfarm payroll employment increased 235,000 (4.4% y/y) during August, the smallest increase since January. It also was roughly one quarter the 1.053 million July increase, revised from 943,000, and below the 962,000 June gain, revised from 938,000. A 725,000 rise had been expected in the Action Economics Forecast Survey.

Average hourly earnings rose 0.6% last month (4.3% y/y) following two months of unrevised 0.4% increase. A 0.3% rise had been expected.

The unemployment rate declined to an expected 5.2% from 5.4% in July. The labor force rose 190,000 last month after increasing 261,000 in July. At the same time, employment in the household survey rose 509,000 after surging 1.043 million in July. The overall unemployment rate, including those who were marginally attached or working part-time for economic reasons, fell to 8.8% from 9.2%. It was the lowest level since March of last year and compared to a recession high of 22.9%.

The 235,000 increase in payroll jobs last month was held back by an unchanged level of hiring in the leisure & hospitality sector (+27.5% y/y) which followed a 415,000 July rise. Hiring, however, slowed down elsewhere in the service sector as well. A 35,000 August rise (3.2% y/y) in education & health services came after an 88,000 increase. The 24,000 rise (3.3% y/y) in trade, transportation & utilities jobs followed a 61,000 July increase and included a 28,500 decline (+2.1% y/y) in retail trade employment. Professional & business services jobs gained 74,000 (5.6% y/y) after a 79,000 strengthening. Within that category, temporary help jobs declined 5,800 (+12.8% y/y) following a 10,100 July rise. Financial sector employment rose 16,000 (1.9% y/y) after a 24,000 July increase. Information services jobs improved 17,000 (5.7% y/y) after rising 21,000 in July.

Factory sector employment rose 37,000 last month (3.0% y/y) following a 52,000 increase in July. Construction sector payrolls eased 3,000 (+2.5% y/y) after rising 6,000 in July. Employment in the mining & logging industry rose 6,000 in August (8.7% y/y) for the second consecutive month.

Government sector employment eased 8,000 last month (-0.2% y/y) after surging 255,000 in July. Local government payrolls rose 14,000 (12.8% y/) including a 5,700 decline (+2.0% y/y) in education services which followed a 224,900 July surge. The number of state government jobs fell 25,000 (-0.0% y/y), including a 20,700 decline (+2.0% y/y) in teachers' jobs. Federal government employment rose 3,000 (-8.5% y/y) after a 9,000 gain.

Average hourly earnings strengthened 0.6%. Earnings in the leisure & hospitality sector jumped 1.3% (10.3% y/y) following a 0.8% rise. Professional & business service sector pay rose 0.6% (4.9% y/y) while education & health sector earnings gained 0.4% (4.5% y/y). Factory sector pay improved 0.3% (3.1% y/y) after a 0.4% rise. Construction sector earnings firmed 0.4% (3.9% y/y) after two months of 0.3% increase.

The length of the average workweek held steady at 34.7 hours where it's been for three straight months. The financial sector workweek held at 37.6 hours for the fifth straight month as the information sector workweek held at 37.2 hours for the third month. Hours worked in the professional & business service sector eased to 36.6 hours from a January high of 36.9 hours. The education & health services workweek held steady at 33.3 hours for the fifth straight week while the leisure & hospitality workweek slipped to 26.3 hours. The factory sector workweek eased to 40.3 hours while the construction workweek held at 38.8 hours.

From the household employment survey, the lower 5.2% unemployment rate in August occurred as the labor force participation rate held steady at 61.7% but remained below the 63.4% high in January of last year. The teenage participation rate rose to 36.7% from 36.1, but for individuals aged 20-24 it eased to 70.2%, a six-month low. For workers aged 25-54, the rate held at 81.8%, but remained below the January 2020 high of 83.0%. For men aged 25-54, the rate increased to 88.4%, the highest level since March of last year. For women of that age, the participation rate eased to 75.4%. For workers aged 55 & over, the participation rate rose slightly to 38.5% but remained below the July 2019 high of 40.5%.

The employment/population ratio for all workers rose to 58.5% in August but remained well below the February 2020 high of 61.1%. An increased 20.6 million worked at home because of the coronavirus, though that was 42.6% lower than the level in August of last year.

The average duration of unemployment edged up to 29.6 weeks from 29.5 in July and remained well above 20.0 weeks twelve months earlier. The median unemployment duration fell to 14.7 weeks, down sharply from 19.8 weeks in June.

The teenage unemployment rate rose to 11.2% but remained below the record 32.1% in April of last year. The rate for workers aged 20-24 edged higher to 9.3%. For workers aged 25-54, the rate eased to 4.7%, and remained down from last April's high of 12.8%. For those over 55, the jobless rate declined to an expansion low of 3.9%.

By educational attainment, the rate of unemployment of workers without a high school diploma fell to 7.8% and remained below the 12.6% rate one year earlier. High school graduates without any college were a lessened 6.0% unemployed last month, down from the April 2020 high of 17.3%. Those with some college but no degree were unemployed at 5.1%, down sharply from the April 2020 peak of 15.0%. College graduates saw their unemployment rate fall to 2.8% last month but remain higher than the 1.9% low in February of last year.

The employment & earnings data are collected from surveys taken each month during the week containing the 12th of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.

Employment (SA, M/M Change, 000s) Aug Jul Jun Aug Y/Y 2020 2019 2018
Payroll Employment 235 1,053 962 4.4% -5.8% 1.3% 1.6%
 Previous Estimate -- 943 938 -- -- -- --
  Manufacturing 37 52 32 3.0 -5.0 1.0 2.0
  Construction -3 6 -2 2.5 -3.0 2.8 4.6
  Private Service-Producing 203 734 766 5.6 -6.6 1.4 1.5
  Government -8 255 154 -0.2 -3.1 0.7 0.5
Average Weekly Hours - Private Sector 34.7 34.7 34.7 34.7 34.6 34.4 34.5
Private Sector Average Hourly Earnings (%) 0.6 0.4 0.4 4.3 4.8 3.3 3.0
Unemployment Rate (%) 5.2 5.4 5.9 8.4 8.1 3.7 3.9
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