September 6, 2019

.Private employment r rose 130 thousand in August after having risen 159 thousand in July and 178 thousand in June.   A better reading of what is truly going on is typically represented by the  3-month moving average of private employment which is now 156 thousand.  To us, the pace of private sector hiring has slowed from 215 thousand per month last year, to about 130, but when the government sector is included that number jumps to about 150 thousand.  That is exactly what one would expect if the economy is truly at full employment.  There are simply not enough adequately trained workers available to hire.  Labor force growth rose about 110 thousand in the past year.  With employment gains continuing to exceed growth in the labor force, the unemployment rate should continue to decline slowly.

Amongst the various employment categories construction employment rose 14 thousand in August after having declined 2 thousand in July.  The trend increase in construction employment appears to be about 15 thousand per month.

Manufacturing employment rose 3 thousand in August after having risen 4 thousand in July.    Factory employment is now rising by about 12 thousand per month.  It is struggling as the recently imposed tariffs take a toll on growth on the goods sector.

Elsewhere, health care  climbed by 24 thousand.  Social assistance added another 13 thousand jobs in August.  Education declined 5 thousand.  Professional and business services increased 37 thousand in August.   Employment in leisure and hospitality establishments climbed 12 thousand.  Financial services gained 8 thousand workers.  Retail jobs declined 11 thousand.   In the public sector, government jobs increased by 34 thousand of which 28 thousand was in the federal government sector as it started hiring the temporary workers required to do the 2020 Census.

In any given month employers can boost output by either additional hiring or by lengthening the number of  hours that their employees work.  The nonfarm workweek roe 0.1 hour in August to 34.4 hours after having declined 0.1 hour in July.  It has been bouncing around between 34.3 and 34.5 hours for the past year.  The still  elevated level of the workweek  in most industries implies that employers are in need of workers and will continue to hire at a meaningful pace in the months ahead.

The increases in  employment and hours worked are reflected in the aggregate hours index which rose 0.4% in August to 111.3 after having declined 0.,2% in July to.  This index climbed by 1.8% in the first quarter and 0.5%% in the second quarter, and seems on track to rise 0.6% or so in the third quarter.  But with a projected increase in productivity of 12.0% it still seems likely that GDP growth in the third quarter will be roughly in line with the 2.4% we are projecting.

There is no doubt that the consumer sector of the economy is expanding at roughly a 2.5% pace.   The stock market had a tough couple of months late last year but has completely recovered and is currently very close to a record  high level.    Consumer confidence fell in the fourth quarter but it, too, has recovered and now stands at a 15-year high.

The sectors of the economy that remains under pressure are the various production industries.  They are largely unchanged.  As noted earlier, factory employment is barely increasing.  Construction employment has been rising slowly but steadily.  Mining employment is essentially unchanged.  The service sector, however, is booming.

Looking ahead, steady consumer spending and continued rapid growth rate in investment should cause  GDP to grow 2.5% this year.

Stephen Slifer