Most jobs were created in professional and business services (+74,000), transportation and warehousing (+53,000), private education (+40,000), manufacturing with most of them coming in motor vehicles despite ongoing struggles to source parts, and other services (+37,000). Employment in retail trade declined over the month (-29,000) mostly because of food and beverage stores (-23,000) and building material and garden supply stores (-13,000). Employment in leisure and hospitality was unchanged.

Source: Analysis U.S. Department of Labor and Wells Fargo Securities

Overall, nonfarm employment has risen by 17 million since April 2020 but is down by -5.3 million, or 3.5%, from its pre-pandemic level in February 2020.

The standard, headline unemployment rate (U-3) dropped to 5.2 percent in August 2021, the lowest level since March 2020 and in line with market expectations, as the labor market continued its steady recovery following business re-openings in the US and despite reports of labor supply shortages and concerns over the lingering threat of the COVID-19 resurgence. The number of unemployed people fell by 318,000to 8.38 million, while employment levels increased by 509,000 to 153.15 million.  The broad or real unemployment rate (U-6) is at 8.90%, compared to 9.60% last month and 14.30% last year. This is lower than the long term average of 10.44%.

Headline and Real Unemployment Rates

Although the jobless rate remained well above the pre-crisis level of about 3.5 percent, experts believe that the rate should decline further due to strong economic activity and demand for labor

As indicated, the Delta surge is holding down job growth in the leisure & hospitality sector. After increasing by more than 300K for four straight months, employment growth was stagnant in August.

Unemployment Intensity is the product of the duration and the rate of unemployment.  The unemployment intensity is constructed by multiplying the unemployment rate for an index representing the average duration of unemployment, with the idea that unemployment becomes more intense when its duration increases.  As shown below unemployment intensity has increased since the end of the COVID-19 recession but appears to have leveled out and possibly shifting downward.

Unemployment Intensity Index .

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According to the United States Department of Labor August Jobs Report, the unemployment rate decreased by 0.5 percentage points from the previous month to 5.4 percent which was below the forecast of 5.7 percent July unemployment rate.  The rise can be attributed to more people returning to work which is a sign that the labor market is beginning to recover from the  short but deep recession.

The National Bureau of Economic Research (NBER)  Business Dating Committee determined that the COVID-19 recession lasted just two months (from February 2020 to April 2020), which would makes it the shortest US recession on record.  Despite the fact that the COVID recession is deemed over,  it is important to note that the unemployment rate is still well above the pre-pandemic level of 3.9 percent.

The restoration of 978,000 (the highest number jobs in the prior ten months) jobs is significant and beat the employment forecast of 950,000 for the month of July. The three month moving average for July is approximately 832, 000 jobs restored.   Nonfarm payroll employment in July was up by 16.7 million since April 2020 but it is still down by 5.7 million compared to its pre-pandemic level in February 2020

The Economic Policy Institute (EPI) states that, the unemployment rate fell for the right reasons in July as more people found work rather than left the labor force.   They predict that the current pace of job restoration/growth (as a result of lifting of more COVID-19 restrictions) will lower the unemployment rate to pre-pandemic levels (4 percent or lower) by July 2022 with a full recovery by the end of 2022 – a recovery five times as fast as the recovery following the Great Recession.  Other analysts believe that a full recovery can occur as early as February 2022.

Similar to the July Jobs Report, notable job gains occurred in leisure and hospitality with an increase of +380,000 and food services and drinking places (+253,000). The Employment Situation , July2021 report also points to job gains in local government (+221,000).  Employment also continued to increase in accommodation (+74,000) and in arts, entertainment, and recreation (+53,000). Despite recent growth, employment in leisure and hospitality is down by 1.7 million, or 10.3 percent, from its level in February 2020.   

Industries impacting the IAM show a slight net employment increase from the previous month in in transportation and warehousing (+50,000 for all employees)). Specifically, employment gains where in transit and ground passenger transportation (+19,000), warehousing and storage (+11,000).  The good news in this industry is that employment has grown by 534,000 since April 2020, a 92.9 percent recovery from of the jobs lost during the February-April 2020 recession (-575,000).

Employment in manufacturing increased by 27,000 in July, largely in durable goods manufacturing (+20,000). Within durable goods, job gains occurred in machinery (+7,000) and miscellaneous durable goods manufacturing (+6,000). Overall, manufacturing employment is well short (-433,000) of its February 2020 level.

Manufacturing Employment

Month to Month change in Manufacturing Employment

Job gains in durable goods such as fabricated metal products (+4,500 for all employees and +3,800 for production and nonsupervisory workers), and primary metals (+2,500 for all employees and +3,700 for production and nonsupervisory workers)  Nonmetallic metals saw increases by 1,800 employees and 300 production and nonsupervisory workers.  Other durable goods manufacturing sectors pertinent to the IAM  include transportation equipment (-1.500 all employees and +2,000 production and nonsupervisory workers), computer and electronic products (-500 all employees and 2,400 production and nonsupervisory workers), electrical equipment and appliances (+200 all employees, and production and nonsupervisory workers, respectively),  transportation equipment (-1,500 all employees and +2,000 production and nonsupervisory workers).

Durable Goods Employment

Month to Month Change in Durable Goods

Non-Durable goods producers gained +7,000 jobs for all employees and for production and nonsupervisory employees, respectively 

Month to Month Change in Nondurable Employment

Within the nondurables sectors employment gains/losses were mixed.  For instance, employment in food manufacturing increased by 4,000 for all employees and by 3,600 production and nonsupervisory workers.  Overall employees in chemical manufacturing saw growth of all workers by +2,600 while the number of production and nonsupervisory workers saw a decrease by -1,800 jobs The number of jobs increased in rubber and plastics (+300, and +1,600 production and nonsupervisory employees) and, Petroleum and coal products employees continue to see a month over month decrease by -.400 employees and-1,600 for production and nonsupervisory workers).

Most economists and analysts believe that the August 2021 Employment Situation report is a good indicator that the economy is heading in the right direction.  According to Dean Barker of CEPR, the “Delta variant had not had a major impact on the labor market, at least through the middle of July. If its spread can be contained we will likely continue to see strong job growth, coupled with declines in unemployment”.

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According to the United States Department of Labor June Jobs Report, the unemployment rate increased slightly to 5.9 percent which was above the consensus forecast of 5.8 percent June unemployment rate.  The rise can be attributed to more people looking for better jobs where workers are “felling empowered” and therefore are quitting their jobs at a faster rate than in previous months.  For instance, the number of people who became unemployed voluntarily rose by 164,000 to 942,000 in June.  It is important to note that the rate is still well above the pre-pandemic level of 3.9 percent. 

The restoration of 850,000 (the highest number jobs in the prior ten months) jobs is significant and beat the employment forecast of 750,000 for the month of June.  Overall, the average monthly job growth over the past three months is approximately 567,000. 

The Economic Policy (EPI) predicts that the current pace of job restoration/growth (as a result of lifting of more COVID-19 restrictions) will lower the unemployment rate to pre pandemic levels (4 percent or lower) by July 2022 with a full recovery by the end of 2022.

The US Bureau of Labor Statistics states that the notable job gains in June occurred in leisure and hospitality (+343,000) as pandemic-related restrictions continued to ease in some parts of the country; public (+230,000) and private education (+39,000); professional and business services (+72,000); retail trade (+67,000) and other services (+56,000). Nevertheless, nonfarm payroll employment is down by 6.8 million, or 4.4 percent, from its pre-pandemic February 2020 level.

Industries impacting the IAM show a slight net employment increase from the previous month in in transportation and warehousing (+10,700 for all employees and +7,300 for production and nonsupervisory workers). 

Specifically, employment gains in warehousing and storage (+13, 600,), air transportation (+7,800), and truck transportation (+6,400) and rail transportation (+400). However, within the industry there were stagnant or negative employment losses including transit and ground passenger transportation (—100).

Overall, current employment for all workers in transportation and warehousing is approximately 5,729,500 which is 93,600 below its February 2020 level.

Manufacturing Employment

Employment for all employees in manufacturing increased slightly in June for all employees, +15,000 and by +30,000 for production and nonsupervisory employees.

Month to Month change in Manufacturing Employment

Durable Goods Employment

Month to Month change in Durable Goods Employment

 Job gains in durable goods such as fabricated metals (+5,700 all employees, +2,300 production and nonsupervisory workers),primary metals (+3,100  all employees  and +4,700 for production and nonsupervisory workers) were offset by a loss in  transportation equipment (-6,300 all employees and -1,700 production and nonsupervisory workers) Specifically,  motor vehicles and parts saw loses by  -12,300 all employees , and +12,500 production and nonsupervisory workers).  

Other durable goods manufacturing sectors pertinent to the IAM  saw mixed job growth include machinery (+300 all employees and +3,200 for production and nonsupervisory employees), and   computer and electronic products (-1,400 all employees and +7,400 production and nonsupervisory workers).

Non-Durable goods producers lost -3,000 jobs for all employees and no change for production and nonsupervisory employees 

Non-Durable Goods Employment

Month to Month change in Non-Durable Employment

Within the nondurables sectors employment gains/losses were mixed.  For instance, employment decreased workers in rubber and plastics (-2,900, and -200 production and nonsupervisory employees) and chemical manufacturing (+1,700, and -300 production and nonsupervisory employees), Petroleum and coal products employees saw a decrease by -1.000 employees (-1,900 for production and nonsupervisory workers).

Overall, data from the July employment report indicates that even though the economy is recovering the U.S. labor market has yet to recoup pre pandemic manufacturing jobs, a difference of 481,000.   Nevertheless, the anticipated federal fiscal stimulus should fuel the speed of the job’s recovery reaching or exceeding its pre-pandemic level by the end of 2022. 

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The United States unemployment rate jumped to 4.4 percent in March 2020, the highest since
August 2017 and well above market expectations of 3.8 percent (pre coronavirus forecast), as
the COVID-19 crisis threw millions out of work. Overall, nonfarm payroll employment declined
by 701,000 jobs.

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Real Gross Domestic Product (GDP) increased at annual rate of 1.9 percent in the third quarter of 2019.  This is down from the 2% annual rate in the second quarter of 2019.   The third quarter figure was above the consensus forecasted figure of 1.6% and above the GDPNow for third-quarter forecast of 1.6%.  The New York Fed Staff Nowcast forecast was the most accurate prediction 1.9% for 2019 Q3.  

The Nowcasting Report indicates that in the fourth quarter of 2019, real GDP will grow at 0.8 percent. 

GDP Growth Rate in the United States averaged 3.21 percent from 1947 until 2019.

Household consumption, government spending and exports were the main drivers of growth while business investment fell and imports made a negative contribution to GDP.  

According to Dean Baker of the Center for Economic and Policy Research, “the economy seems positioned to continue to grow, albeit at a very modest pace. The tax cut provided a temporary boost to growth last year, but its impact has now essentially dwindled to nothing. Furthermore, the growth was overwhelmingly driven by consumption, not investment, as investment growth was modest even in the quarters immediately following the tax cut.”

Some analyst predict that the GM strike should weigh on motor vehicle inventories in Q4 and the dichotomy between consumers and businesses is likely to continue.  Thus, GDP growth prospects should remain contained at around a 2% pace, on average, over the next few quarters.

The Survey of Professional Forecasters concur, stating that the real GDP will grow by 2.0 percent in the fourth quarter of 2019, and 1.9 percent in the first quarter of 2020. On an annual-average over annual-average basis, the forecasters expect real GDP to grow 2.3 percent in 2019 and 1.9 percent in 2020.

Overall, forecasters predict U.S. real GDP growth over the next year to remain largely unchanged.  Real GDP is forecasted to average 2% growth over the course of 2020.  The forecasters also predict improvement in business fixed investment and residential investment growth.

Consumer Expenditures

Overall GDP growth in the third quarter was largely driven by real personal consumption expenditures, which increased at a 2.9% annualized rate, down from 4.6% in the second of 2019. Specifically, real personal consumption expenditures on durable goods increased by only 7.6 percent in the third quarter of 2019, down from 13% in 2^nd Quarter of 13%. Non-durable goods rose 4.4%. Real consumer spending on services rose to 1.7%.   

Forecasted personal consumption for fourth quarter 2019 dropped to 1.9 percent but increased by one percentage point to 2.0 percent in the first and second quarters of 2019.  By fourth quarter of 2021 personal consumption is forecasted to be at 2.2 percent which is 0.9 percentage points below the current personal consumption rate.

Business Investment

Business investment shrank by -3.0 percent.  “This is not only the worst performance since late 2015, but it is also the first back-to-back contraction of more than 1% in business investment since 2009, reflecting the drags from weak global growth, rising trade protectionism, elevated policy uncertainty, a strong dollar, and depressed energy activity,” says Gregory Daco, chief U.S. economist at Oxford Economics.

Business Investment is expected to rebound to 3.4 percent by fourth quarter 2019.  On average, business investment growth is expected to be 3.4 percent per quarter in 2020 and 2021, respectively, with the lowest at 1.8 percent in 2Q in 2020 and 4.0 percent in 1Q 2021.

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According to the United States Bureau of Labor Statistics, the U.S. employment rate fell to 3.9 percent in July 2018 from 4.0 in June 2018. This rate matched market expectations. Non-farm payrolls in the United States increased by 157 thousand jobs in July 2018 which was below market expectations of 190 thousand. The August job number is far below the revised 248 thousand job number for June 2018.  Many economist forecast job gains will be average between 100,000 to 125,000 in the future.

In July, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $27.05. Over the year, average hourly earnings have increased by 71 cents, or 2.7 percent.

Manufacturing added 37,000 jobs in July, with most of the gain in the durable goods component. Employment rose in transportation equipment (+13,000), machinery (+6,000), and electronic instruments (+2,000).

Overall, at 3.8%, the unemployment rate in the manufacturing sector is below the national average.  The current unemployment rate for durable goods (3.5%) decreased by .5 percentage points from the previous year while nondurable goods unemployment rate increased from 4.4% in July 2017 to 4.4 % in July 2018.

Employment of production and nonsupervisory employees (a good measure for rank and file workers) showed that private sector remained steady at 104,461 jobs in July 2018 compared to 104,345 in June. In the goods-producing industry, manufacturing produced 8,952 jobs, while employment in durable goods (5,495) and nondurable goods (3,457) saw little change.

Average hourly earnings for private sector production and nonsupervisory employees increased by $0.03, from in $22.62 in June to $22.65 in July, while annual wage growth rose by $0.59 or 2.7%.  Wages in the manufacturing sector also increased by 2.7% during this same period.  Average hourly earnings rose annually in the durable (2.7%) and non-durable (2.6%) sectors, respectively.

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