160902 us employment august report

US Watch

Group Economics Macro & Financial Markets Research

02 September 2016

US jobs market cools in August 

The slowdown in job gains in August to 151K from 275K in July is more consistent with an economy that has been growing below trend

Maritza Cabezas Senior Economist

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Unemployment was flat at 4.9%, remaining steady for almost a year

Tel: +31 20 343 5618

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The pace of wage growth slowed, rising only 0.1% after increasing 0.3% in

maritza.cabezas@nl.abnamro.com

July; we don’t see much room for a rebound in wage growth given weak business activity 

This jobs report takes away the urgency of a rate hike in September. We think that the US economy will improve in the next quarters, supporting a rate hike in December

US nonfarm payrolls cools in August, while unemployment remains steady Nonfarm employment increased by 151K in August, following an upwardly revised 275K in July. However, total revisions over the past two months added up to 1K fewer jobs. This report shows some moderation in job growth compared to the past two months. However, job gains in this report are more consistent with an economy still growing below trend. The details of the establishment survey suggest that hiring in the goods-producing sector remains weak. The manufacturing sector cut 14K jobs, while construction lost 6K jobs.

The manufacturing sector seems to be having difficulty filling positions, since job openings have been rising. Meanwhile, service-producing activities continue to hire at a solid pace, notably education and health (+39K) and trade and transport (+34K) made a stronger contribution. The household survey showed that unemployment was flat in August at 4.9%. Unemployment has been hovering around 5% for almost a year. Other measures of labour utilization, including part-time workers for economic reasons remained unchanged (9.7%).

Wage growth slows modestly Average hourly earnings rose by 0.1% mom, after increasing by 0.3% in August. The annual increase of average hourly earnings was 2.4%, down from 2.7% the previous month. This is still below the 3-3.5% trend wage growth that the Fed would like to see. We think weak business activity could be one of the reasons for keeping wage growth somewhat subdued.

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US Watch - US jobs market m cools s in August - 2 Septemb ber 2016

Unemployment s steady in the past year 000’s

%

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600 400 200 0 -200 -400 -600 -800 -1000

10 9 8 7 6 5 4 06

07

08

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1 12

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Changee in non-farm payro olls (thousands, lh hs) Unemp ployment (%, rhs) Source: Bloomberg

Jobs report r takes a away the urgen ncy of a Septe ember hike We think that today’ss job numbers take t away the urgency to hikee rates in Septtember. A rate hike in Septemb ber would have required a stro onger job reporrt, including firm mer wage growth h. Wage growth h remains mod dest and the pre eferred measu re of inflation for f the Fed, the core-PCE, remai ns subdued. We W expect the US U economy too improve in the e next quarters, supporting a rate hike in December.

D Markets reacted w with a bit of disappointment as US 10Y yields edg ged down, while the US dolla ar, which had bbeen rallying the previous d againsst a major bask ket of currencie es. days declined

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