The US employment report for August reported headline non-farm payrolls of -54K from a revised -54K in July, compared to consensus expectations of -100K. Upward historical revisions contributed to the report's positive surprise, with July revised to -54K from -131K and June revised to -175K from -221K. Net historical revisions totaled +123K jobs. Separately, the unemployment rate rose to 9.6% in August from 9.5% in July in line with consensus expectations. The household survey reported a gain of +290K jobs in August from -159K in July, -301K in June. Elsewhere, the average work week was unchanged at 34.2 hours, while average hourly earnings rose 0.3% m/m and 1.7% y/y to $22.66 and average weekly earnings rose 0.3% m/m and 2.9% y/y to $774.97. Once again, ADP employment lowballed private employment, which added +67K jobs in August from +107K in July. This was a better than expected report on a number of fronts, and should help dispel any remaining concerns over a double-dip recession this year. While jobs growth stagnated this summer, private sector hiring continued with a notable improvement in services.
A breakdown of the establishment survey reflects a mixed picture. Construction employment gained 19K jobs in August from -4K in July, while manufacturing lost -27K jobs from a gain of 34K in July. The service sector gained 67K jobs in August from 70K in July, with retail trade reflecting a loss of -5K jobs from a gain of 7K in July; leisure and hospitality gained 13K from 11K; trade and transport lost -9K from +25K; and business services gained 20K from -3K. Health and education added another 45K jobs from 34K, while government lost -121K jobs from -161K driven by a loss of -114K in temporary census jobs. This was a positive report. The headline figure surprised to the upside, historical revisions were strongly positive, the household survey showed a sizable gain, and private sector jobs growth remained firmly in positive territory. However, with the unemployment rate expected to remain near the 10% for the remainder of the year, the pressure is on the White House to fine tune its jobs growth strategy ahead of the mid-term elections. If not for a large increase in the civilian labor force during August (+550K), the unemployment rate would have likely remained unchanged. The number of workers NOT in the labor force fell -341K in August, the first drop in four months. The details of this report belie a far more constructive scenario than the headline number suggests.
I know it sounds odd to say the jobs report was positive when it reported a loss of 54 thousand jobs in August, but it was thanks to upward revisions to June and July data. July data was revised to -54K from -131K and June was revised to 175K from -221K indicating that the jobs market was not as bad as previously thought. It also goes to show how useless the preliminary numbers are. An encouraging data point within the report was the number of workers not in the labor force dropped by 341K. The market liked the report because it was better than expected and risk was put on (except oil). It was good enough to overshadow the weak ISM number which came in below expectations. Here is the Bank of New York Mellon's take on the job report.