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Friday, September 6, 2019
August Jobs Report Yields Disappointing Numbers
The Bureau of Labor Statistics has released the monthly jobs report for August and the hiring numbers for last month are further evidence that the economy is slowing.
In raw numbers, the BLS reported that the economy added 130,000 jobs to nonfarm payrolls and the unemployment rate was unchanged at 3.7 percent. The report notes that 25,000 of the new jobs were temporary census workers hired by the federal government.
Job creation in August was short of expectations and below average for the current year. Economists had predicted a gain of about 158,000 jobs. The August numbers, especially when the temporary census jobs are subtracted, was the worst month for job creation since last February.
Job creation was offset by the loss of 11,000 jobs in retail and 5,000 jobs in the mining industry. There was little change in construction, manufacturing, transportation and warehousing, and leisure and hospitality, industries in which the report notes “job growth in these industries has moderated thus far in 2019 compared with 2018.” Some of the job loss in retail could be attributed to the rise of internet retailers such as Amazon.
In the same report, the BLS revised down the job creation numbers from June and July. In June, businesses created 15,000 fewer jobs than previously reported while July numbers were downgraded by 5,000.
The stock market reacted to report by pulling back a surge that resulted from the news that the US and China will resume trade talks next month. As of this writing, the Dow is up about 82 points for the day.
The primary change in the economy over the last year has been the escalation of the trade war with China. As reported last week in The Resurgent, manufacturing output has decreased to its lowest point since 2009, putting the manufacturing sector in a recession already. This is largely due to decreased demand.
Despite the manufacturing slowdown and declining jobs in retail, consumer confidence remains relatively high. Confidence is above 2016 levels, but it has fallen sharply since the onset of the trade war last year. The addition of President Trump’s new tariffs, with one round of taxes on consumer goods effective Sept. 1 and another due in December, may further erode confidence.
“Household consumption right now is propping up the U.S. economy,” Joe Brusuelas, chief economist for the audit and consulting firm RSM, told NPR. “We’ll see if the uncertainty tax that’s been placed on the economy by trade policy begins to adversely influence consumer attitudes.”
The Wall Street Journal points out that, while the contraction in manufacturing due to the trade war is problematic, the bigger concern is the services sector that includes retail. If hiring slows enough to raise the unemployment rate, consumers could slow their spending and the economy could slow further as a result. Trade uncertainty and the possibility that businesses could slow their investments is yet another threat.
President Trump has pressed the Fed to decrease interest rates and the August jobs report will likely support the need for an interest rate cut, but a lower interest rate is not the answer to what ails the economy. It is the trade war that has led to what seems to be a global manufacturing slowdown and things are likely to continue to get worse until the trade uncertainty is resolved.