It was not the sort of job-creation numbers analysts had been expecting after three straight months of 200,000 or more jobs created in April, June and July: in August, the number fell to 156,000, and figures for June and July were revised downward by a combined 40,000 jobs. The unemployment rate ticked up to 4.4 percent.
The numbers don’t bode well for September, a month that was expected to see the economic effects of Hurricane Harvey on Houston, the nation’s fourth-largest city, which came to a standstill. Hurricanes are not kind on job creation: when Hurricane Katrina struck New Orleans in August 2005, what had been the strongest year in job creation since 1999 came to a near halt, with September and October recording anemic job creation of 67,000 and 84,000 jobs. It picked up again strongly in November and for several months after that. Hurricane Andrew’s effects were just as dramatic in 1992: job creation fell to just 36,000 the month after it struck.
But for now, the economy continues to set records, posting its 83rd straight month of job gains, going back to September 2010, the last month when the economy shed jobs. So far this year, the economy has added 1.4 million net jobs, an average of 176,000 jobs a month–somewhat less than the average 187,000 jobs a month created in the last Obama year, but still healthy: on Thursday, the Commerce Department reported that the economy grew at an annual rate of 3 percent in the second quarter, revised from 2.6 percent in an earlier calculation. That’s the strongest three-month clip since the first quarter of 2015, when the economy grew by just over 3 percent.
Average hourly earnings, the more meaningful indication of economic gains for rank and file workers, rose by just 3 cents in August, to $26.39, after rising by 9 cents the previous month. A rise of 3 cents is not enough to keep up with the rising cost of living, let alone get ahead–or enhance one’s standard of living. Over the past 12 months, average hourly earnings have increased by 65 cents, or 2.5 percent, just enough, or a shade better, to keep up with cost of living increases.
“Nominal wage growth is steady, yet real wage growth has room for improvement,” said U.S. Secretary of Labor Alexander Acosta in a statement released this morning.
“The failure of salaries to rise amid robust hiring and falling unemployment in the past few years is something of an economic mystery,” the New York Times reported this morning. “The data for August will probably intensify that question.”
The paper was overstating the mysterious aspect of the numbers, which the Harvard Business Review explained this way: “The allocation of corporate profits to stock buybacks deserves much of the blame. Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees.”
Two other underlying indicators of economic strength have been static for most of the past 12 months: The labor force participation rate remains at 62.9 percent, and the employment-population ratio is at 60.1 percent.
The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was 5.3 million in August, and has shown little movement in recent months. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.
When those part-time workers’; numbers are added to the number of discouraged workers–those who have dropped out of the workforce, though they are still able to work–a more accurate portrait of unemployment and underemployment emerges–the so-called alternative measure of unemployment, which the Bureau of Labor Statistics places at 8.6 percent for August, again a figure unchanged since April (aside from a May dip), the last time it saw significant improvement.
“Multiple economic sectors showed job growth in August,” the labor secretary said, “including 36,000 manufacturing, 28,000 construction, and 6,000 mining and logging jobs. The breadth of job gains across manufacturing sub-industries is at a 20-year high; more than 70 percent of manufacturing sub-industries added jobs in August.”