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U.S. employment rises modestly, Canada’s rebounds

(Sept. 6, 2013) -- "The overall workweek provided somewhat more encouraging news in rising to 34.5 hours from 34.4 hours in July thereby providing some indication that firms met demand by working employees longer rather than taking on new workers," said Ferley. "The manufacturing workweek rose as well to 40.8 hours from 40.7 hours in July with overtime jumping to 3.4 hours from 3.2 hours last month."

NEW YORK — The increase in August 2013 payroll employment of 169,000 was down slightly from market expectations of a 180,000 increase, RBC Economics reported today.

The August increase still managed to represent an improvement from July although this was abetted by a sizeable downward revision to the increase in that month to 104,000 from a previously estimated 162,000, said Paul Ferley, assistant chief economist. 

The June gain was also revised downward to 172,000 from 188,000 previously. The separate household survey indicated an unexpected drop in the unemployment rate to 7.3 percent although this resulted from a sizeable 312,000 decline in the labor force outpacing a 115,000 drop in household employment.

Government employment surprised as well although on the upside by rising 17,000 in the month; however, this followed sizeable downward revisions the previous two months with the 1,000 rise previously reported for July being cut to a decline of 23,000, and the June decline deepened to -22,000 from -8,000. The downward revision to July government employment accounted for a little less than one-half of the overall downward revisions to July payrolls and accounted for about all of the June payroll revision.

Private-sector employment rose 152,000 in August following downwardly revised gains in both July and June to 127,000 and 194,000 from 161,000 and 196,000, respectively. Within the private-employment gain in August service-producing jobs contributed 134,000 new jobs following a 144,000 contribution in July (previously 157,000). The increase in August continues to be led by retail (44,000), education and health services (43,000), and professional and business services (23,000). Goods-producing industries rose 18,000, which offset the 17,000 drop in July (up 4,000 previously). The August increase mainly reflected a 14,000 rise in the manufacturing component with the mining and logging sector providing the remaining 4,000.

“The overall workweek provided somewhat more encouraging news in rising to 34.5 hours from 34.4 hours in July thereby providing some indication that firms met demand by working employees longer rather than taking on new workers,” said Ferley. “The manufacturing workweek rose as well to 40.8 hours from 40.7 hours in July with overtime jumping to 3.4 hours from 3.2 hours last month.”

As a result of the rise in the workweek and to a lesser extent the gain in employment, the index of aggregate weekly hours rose a robust 0.4 percent, which more than offset the 0.1 percent decline in July, he added.

The index of average hourly earnings, the principal wage measure in the report, rose 0.2 percent in the month. This contributed to the year-over-year rate in August rising to 2.2 percent from 2.0 percent in July.

“The average gain in payroll employment during the last three months of 148,000 implied income growth that was sufficient to keep consumers spending although at a relatively modest pace,” said Ferley. “Looking ahead, some encouragement can be taken from the rise in the workweek that may be a prelude to firms opting to take on additional workers. The continued downward trend in jobless claims provides further reason to expect payroll gains to strengthen in September. Strengthening job growth and an easing in fiscal restraint are expected to contribute to growth returning to an above-potential rate on average for the second half of 2013.

“Assuming that the Federal Reserve takes a similar view of the recent trends, it will likely result in the central bank starting to reduce asset purchases during the fall,” he added. “Our forecast assumes that the so called tapering begins in October with purchases fully wound down by the middle of 2014 although this is contingent on upcoming economic releases confirming greater strength is emerging.”

Canada’s labor market rebounded in August

After two disappointing months, Canada’s labor market bounced back in August with 59,200 jobs created. The August increase was larger than expected and came after a 39,400 drop in July with little change in employment in June, said Dawn Desjardins, assistant chief economist.

Likely, the dismal performance in these two months was partly a correction following the oversized surge in employment in May of 95,000. The unemployment rate edged downward to 7.1 percent from 7.2 percent thereby holding firmly in the range established since November 2012. Job gains were concentrated in the private sector with self employment also posting a decent increase.

Public-sector employment stabilized, recording a gain of 9,000 after plunging 74,000 in July. Jobs created in August were mainly part-time (41,800) with full-time employment up 17,400. The increase in full-time employment largely offset July’s 18,300 while the jump in part-time jobs more than fully compensated for July’s 21,200 decrease. Year-to-date employment is up 101,600 with full-time employment rising 38,400 and part-time employment up 63,200.

On an industry basis, job gains were evident in both the goods- and services-producing parts of the economy. Goods producers in construction and manufacturing posted gains while agricultural industries cut 10,800 jobs. In the services sector, gains were concentrated in accommodation and food services, information and culture, and health care. The largest declines came in educational services (-22,000) which built on July’s 16,400 drop. Conversely, health care and social assistance employment more than recovered July’s 47,300 decline and increased by 59,500 in August.

Information and cultural industries that also posted a sizeable drop in July more than recovered those losses and increased by 33,200. Public administration conversely continued to lose jobs with another 6,700 decline recorded in August. Job losses also occurred in finance, insurance and real estate and business building, and support services and “other” services.

Job gains were mainly among people aged 55 years and older. Youth employment stabilized after falling by 46,000 in July. The youth unemployment rate was 14.1 percent in August, which was up from July’s 13.9 percent. The student summer-employment rate was 48.6 percent in August, which was higher than in August 2012 but still holding well below the average of the 2006 to 2008 period when it was 54.1 percent. Hours worked by students fell for the first time since the summer of 2009.

The pace of increase in hourly earnings for permanent employees (the Bank of Canada’s favored measure) inched up to 1.5 percent in August from 1.3 percent July although remained well below the run rate of the previous six months of 2.2 percent. Hours worked continued to recover posting a 0.4 percent in August and 0.3 percent increase in July. These two gains followed declines of 0.1 percent and 0.2 percent in June and May, respectively.

The largest employment gains were recorded in Ontario and Alberta while Quebec, which suffered a 30,000 drop in July, saw another 5,000 jobs lost in August. Alberta, which hired 17,000 more workers in July, added another 15,200 although this was outpaced by a rise in the labor force thereby resulting in the unemployment rate ticking back up to 4.8 percent.

“The solid gain in August employment was encouraging although the three-month trend rate of hiring in Canada stood at just 6,500, which was much slower than the 18,400 average gain as of July,” said Desjardins. “The unemployment rate remained in the tight range of 7.0 percent and 7.2 percent that was established in November 2012 thereby indicating the persistence of modest slack in the labor market. Increased hiring is also consistent with expectations of the economy rebounding in the third quarter of 2013 after the modest second-quarter gain of only 1.7 percent.

“This rebound, however, is more the result of a reversal of the depressing effect of the Alberta floods and Quebec construction strike on activity late in the second quarter,” she explained. “This is likely to be echoed in other reports, and we expect that it will result in annualized real GDP growth of 3.4 percent in the third quarter, which would double the pace of the second quarter’s 1.7 percent gain. The Bank of Canada acknowledged this “choppiness” in the data in its policy statement released earlier this week while maintaining the overnight rate at 1.0 percent and its mild tightening bias.

“Given the improved tone in the global economy, Canada is poised to enter a period of higher than potential growth resulting in more consistent gains in hiring and a gradual decline in the unemployment rate,” said Desjardins. “In the near term, the Bank of Canada is likely to maintain the policy rate at a stimulative 1.0 percent in an effort to ensure that the economy picks up its stride. Once the economy’s momentum is stronger and there is a commensurate firming in labor market conditions, the Bank will begin the process of the normalization of policy interest rates.”

SOURCE: RBC Economics press release

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About Greg Gerber

Greg Gerber is a freelance writer and podcaster who has been writing about the RV industry since 2000. He is the former editor of RV Daily Report.

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