The return of workers to their jobs continued at a strong pace in August, with 1.371 million jobs added, including 238,000 temporary census workers. Excluding those census workers, who will be laid off at the end of September, the pace of hiring slowed to 1.1 million from 1.7 million in July. It is the fourth consecutive month that the total change in employment improved in excess of 1 million.
The unemployment rate now stands at 8.4%.
Just as important, the household survey showed an increase of 3.7 million individuals, which was the major catalyst for the decline in the unemployment rate to 8.4%, according to the Labor Department data released on Friday. The other reason for the decline was those workers who have exhausted their unemployment benefits and have fallen off the unemployment rolls.
The improvement in the data will likely not provide any further impetus to solve the policy impasse on a fifth round of fiscal aid. The major concern here is that this survey did not capture the loss of roughly $60 billion per month in income supports that lapsed at the end of July. So that impact on spending and its knock-on effects in hiring will not be adequately captured until the September employment report is released on Oct. 2.
Because of the likely sustained policy impasse, this puts further pressure on the Federal Reserve to consider increasing the intensity and pace of its asset purchases through the end of the year to provide accommodation to an economy that after a strong double-digit rebound in the current quarter will slow considerably.
Beyond the undeniably robust headline increase in total employment, significant challenges remain. The average duration of unemployment increased to 16.7 weeks (average duration is 20.2 weeks). There are still roughly 6 million individuals facing temporary layoffs, 3.4 million who face permanent job losses and 7.5 million facing involuntary part-time employment, all of which are indicative of the difficult multiyear period of healing in the domestic labor market that lies ahead.
Once that duration of unemployment hits 26 weeks, that implies a much longer-term bout of structural unemployment for the millions caught on the wrong side of the pandemic. The U-6, or underemployment rate, stands at 14.2%, down from 16.5% in July.
Those between 25 and 54 years old, or prime aged workers, did see a modest improvement in hiring conditions in August, with 88.1% of men in that cohort and 74.9% of women now working.
The composition of hiring illustrated an increase in 984,000 private service-providing jobs, with the higher-paying trade and transport sectors adding 341,000 jobs. Business services advanced by 197,000 (107,000 were temporary) and education and health contributed 174,000 on the month. The government added 344,000 jobs, with 238,000 of them being temporary census workers. The goods-producing sector added 43,000 jobs, construction 16,000 and manufacturing 29,000. The leisure and hospitality sector added 174,000 positions.
Total hours worked increased by 0.3% and aggregate hours worked rose by 1.2%, with average hourly earnings increasing 0.4% on the month and 4.7% on a year-ago basis. The wage increase is still working through composition effects organized around weekly job losses that are still primarily affecting lower-wage workers in the service sector, which skews the number.
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