Jobs Growth Slows Modestly in August
August’s jobs report was weaker than expected, showing that corporate hiring has slowed a bit recently.
Nonfarm payrolls rose 130,000 in August, below consensus expectations for a 164,000 gain despite a 25,000 bump from temporary jobs related to the 2020 Census. As shown in the LPL Chart of the Day, Jobs Growth Slows in August, July’s job increase was also revised down to 159,000, pulling the 12-month average payroll change down to a still-solid 173,000.
We still see tailwinds for the U.S. labor market, though. Payrolls are still growing at an above-average trend for the cycle (when looking at the 12-month trend), and initial jobless claims have hovered near cycle lows for months now.
“The recent slowdown in hiring has been disappointing,” said LPL Financial Chief Investment Strategist John Lynch. “But, unemployment claims are low and wages are still rising at a healthy clip, supporting consumption.”
Corporate fundamentals also look solid, and the Federal Reserve has committed to flexibility in monetary policy in case global weakness continues to impact the U.S. economy. Data currently shows U.S. businesses are putting expansion plans on hold because of trade uncertainty, so a U.S.-China trade resolution could aid corporate sentiment over the long term.
Other details in the August jobs report were more encouraging. Average hourly earnings rose 3.2% year over year in August, near the highest pace of growth in this expansion. Global deflationary concerns have been rampant recently, but U.S. wage growth has remained solid, showing us that domestic inflationary pressures should remain healthy. The average work week climbed to 34.4 hours after dropping to a 22-month low in July.
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