NEW YORK — Payroll employment in the United States rose by 173,000 in August. That was a smaller gain than the 218,000 increase that had been expected by markets but followed upwardly revised 245,000 increases in each of July (previously 215,000) and June (was 231,000), RBC Economics reported.
The unemployment rate, which is calculated from the separate household survey, declined to 5.1 percent in August from 5.3 percent in July, with the participation rate unchanged at 62.9 percent. The unemployment rate is now right in the middle of the 5.0 percent to 5.2 percent range that the Federal Open Market Committee views as consistent with its long-run trend rate.
Private-sector employment rose by 140,000 in August following a 224,000 (was 210,000) increase in July. Government employment rose by 33,000, boosted in part by a 23,000 jump in local government education jobs.
Goods-producing employment declined by 24,000, with declines in manufacturing (-17,000) and mining (-10,000) jobs offset only partially by a small 3,000 increase in construction employment. Service-sector employment rose by 164,000, which was below the 211,000 (was 193,000) increase in July.
The private-sector workweek rose to 34.6 hours from 34.5 hours in July. Along with the gain in headcount, this resulted in a 0.4 percent increase in aggregate hours worked in August that was stronger than the 0.2 percent gains in each of July and June. The average level of this index during July and August was up by 2.3 percent from its second-quarter average, which remains indicative of solid above-potential GDP growth continuing into the third quarter of 2015.
Consistent with some further tightening in labor markets, average hourly earnings rose by 0.3 percent on a month-over-month basis in August, which was slightly stronger than expectations for a 0.2 percent gain, said Nathan Janzen, senior RBC economist. Wage growth on a year-over-year basis remained at 2.2 percent, which was unchanged from July.
“The employment gain in August was smaller than expected; however, upward revisions to prior months take much of the sting out of the disappointment in the monthly reading,” said Janzen. “A larger-than-expected drop in the unemployment rate to the middle of the FOMC participants’ estimate of its long-run trend range of 5.0 percent to 5.2 percent suggested that labor market slack continued to diminish.
“Indeed, although employment growth may well bounce back in coming months, at some point, hiring should slow as shrinking slack in labor markets coupled with weak underlying demographic growth in the working-age population increasingly become a factor restraining labor supply and businesses’ ability to hire,” he explained.
“Quarter-to-date hours worked remain consistent with our expectation that GDP rose at an above-potential 3.0 percent rate in the third quarter of 2015 following a 3.7 percent jump in the second quarter,” said Janzen. “Economic conditions, on their own, remain strong enough to justify higher interest rates, with our current forecast assuming that the first increase in the fed fund target follows the September 16 and 17 FOMC meeting, although recent financial market volatility also remains a concern and could prompt further delays if it persists.”
SOURCE: RBC Economics press release