August 2018 Employment Situation

America’s employment machine is humming.  Lining up nicely with the average monthly gain over the prior year (197,000), another 201,000 jobs were added in August 2018 according to the Bureau of Labor Statistics, improving on the 157,000 increase in July.  Matching the previous month’s tally and just barely above the low of this business cycle, the unemployment rate was 3.9 percent.  Revisions are typical for this report, and the prior two months were downwardly revised by a total of 50,000 jobs.  Nevertheless, the trend for employment remains strong. 

Job gains were spread among many industries.  Professional and business services added 53,000 net new workers.  Health care increased by 33,000 and wholesale trade tacked on another 22,000.  Transportation and warehousing continues prospering in the expansion, adding 20,000 workers.  Mining managed to add 6,000 employees, and construction firms built on their growth of the past year (+297,000) by onboarding another 23,000.  Manufacturing experienced a slight decline, falling 6,000.  Other industries, including retail trade, information, financial activities, leisure and hospitality, and government, were virtually unchanged.

Workweeks were steady.  The average workweek for all employees on private payrolls was unchanged at 34.5 hours.  Manufacturing stayed at 41.0 hours, while production and nonsupervisory employees’ workweek was 33.8 hours for the fifth consecutive month. 

Wage data firmed in August.  Average hourly earnings for all employees rose $0.10 to $26.16.  Over the past year, these earning have improved $0.77 or 2.9 percent.  Average hourly earnings for production and nonsupervisory employees increased seven cents to $22.73.

Improving wage growth seems constructive.  It should help the Federal Reserve justify further monetary policy tightening through at least the end of the year.  Wage growth has been the fly in the ointment for the employment numbers during the current recovery.  This recent acceleration should give the Federal Reserve added confidence that their current rising interest rate regime will not snuff out America’s economic expansion.