The Labor Market Added Jobs and Subtracted Income
Two categories produced 101,000 of August's 162,000 jobs. The best-paying one shed 23,000.
American employers added 162,000 jobs in August. Economists had projected 53,000.
The Bureau of Labor Statistics also reported average hourly earnings up 3.1% over the past twelve months. Fed Chair Kevin Warsh, speaking at Jackson Hole eight days earlier, put twelve-month PCE inflation at 3.7%.
Traders read the payroll beat as clearance to raise rates. Odds of a September increase moved back to roughly 65% within minutes of the release, up from about 50% the day before.
Warsh had told the Jackson Hole audience he was hard pressed to describe broad financial conditions as restrictive. The August report was received as the labor-market half of that case.
The framing held across the morning. A labor market producing three times the expected hiring does not need shelter from higher rates.
That read counted the jobs. It did not read the ledger.
Start with the month next to its neighbors. June came in at 31,000 after revision, and July at 21,000.
August's 162,000 sits on top of those two. The three-month average is 71,000.
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Then look inside the month. Food services and drinking places added 59,000 positions, and local government education added 42,000.
Those two categories produced 101,000 of the 162,000 jobs. Restaurants and public school payrolls carried 62% of the print.
The information sector lost 23,000 jobs. That is the category holding software, publishing, telecom, and data services, and it pays well above the national average.
The rest was thin by comparison. Construction added 22,000, manufacturing 16,000, and health care 13,000.
Not everything in the report was soft. The average workweek lengthened to 34.4 hours, and participation rose to 61.6%.
Hours and participation measure how much work is available. Neither measures what an hour of it pays.
Duration tells a quieter story. Of the 7.0 million people counted as unemployed, 1.9 million have been out of work 27 weeks or longer.
That share is 27%. It sits alongside an unemployment rate of 4.1% and an employment-population ratio of 59.1%.
This is a headcount-income divergence.
Employers are adding positions where labor is cheapest and demand is most immediate. Food service hiring answers to current traffic, and public school hiring answers to the calendar.
Pay growth follows competition for scarce workers. Competition is thinnest in the categories that led August, where turnover runs high and the wage floor sits close to the going rate.
So neither force lifts aggregate pay. Wage growth of 3.1% against inflation near 3.7% means the average hour worked bought less in August than it did a year ago.
The count and the paycheck are moving in opposite directions. A hiring number can beat every forecast on the board while the income behind it erodes.
Labor markets rarely turn on the total. In prior cycles the mix has shifted before the count did, with the best-paying categories stalling while lower-wage hiring held the aggregate up.
The tells
NFIB compensation plans. Watch the share of small firms planning to raise pay over the next three months. A rising share would show wage pressure building underneath the aggregate, and a falling share would show employers filling seats without bidding for workers.
Real average hourly earnings. The August reading publishes September 11 alongside the consumer price index. A move above zero would close the gap between pay and prices, and another negative month would widen it.
Revolving consumer credit. Watch the monthly change in credit card balances. Faster growth would suggest households are covering the pay gap by borrowing, and a slowdown would suggest they are covering it by spending less.
A payroll count measures how many people are working. It does not measure whether working is keeping pace.
Those are two different questions. The monthly headline answers one of them.
Talk soon,
The Playbook Daily
