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Strike muted by pivot to part-time

More people searched for work. 

September 1, 2023

Payroll employment grew by 187,000 in August, after rising a downwardly revised pace of 157,000 in July and even weaker June. August is always a tricky month for employment. The response rate on the survey for this August was only 59.3%, the lowest for the month since August 2007. That suggests another round of significant revisions; they are usually to the upside for the month of August.

Gains in the public sector were small, with an increase of only 8,000; federal government hiring offset losses at the state and local levels. Public sector school districts have had a particularly hard time retaining and attracting workers. Recent work by the ADP Institute shows that contrary to popular belief, it was not retirements but quits by younger teachers and bus drivers that drove the shortages. Average teacher tenure actually increased during the pandemic though younger workers sought better pay in the private sector.

Private sector payrolls increased by 179,000. Over half of those gains were in healthcare and social assistance where job openings remain elevated and are far outstripping the rise in new graduates, especially among nurses. Leisure and hospitality added 40,000 workers. Before seasonal adjustment, hiring was down in the sector, which means that employers held onto more workers than usual at the end of the summer travel season. The gains were concentrated in food services, which has also seen a surge in new business formation. Restaurants are moving to where people are spending their leisure time, which is more on the periphery than in the center of large cities.

Gambling establishments also saw strong gains in August. Blistering heat waves and a blockbuster travel season pushed more people indoors. Casinos in Las Vegas reported a record July; odds are that strength carried into August.

Construction employment continued to increase and added 22,000 jobs during the month. The gains were tied to construction of chip plants and the ramping up of infrastructure programs at the state and local levels. Employment for specialty contractors in the residential space fell during the month.

The largest decline occurred in warehousing and transportation, which dropped by more than 34,000 jobs. The losses were concentrated in trucking, where a major bankruptcy caused mass layoffs. Trucking has slowed more broadly with the manufacturing sector.

Temporary workers continued to trend lower, with a loss of 19,000 during the month. That hiring is off nearly a quarter million from its peak during the height of the hiring frenzy in March 2022.

Motion picture and production workers dropped by 17,000, which is close to what the Bureau of Labor Statistics estimated in its strike report for the month. That showed 16,000 actors on strike of the 160,000 screen actors guild members. Many of the tradespeople are still being paid by the studios, despite the strike. It is unclear how long that will last.

Average hourly earnings cooled to an 0.2% increase in August, after rising 0.4% in July. Some of that can be attributed to the composition of employment gains. Pay for healthcare workers moved up significantly in recent years but the pace of increase has slowed quite dramatically over the last year. That translates to a 4.3% increase in August from a year ago after rising 4.4% in July. August had two fewer weekend days than July, which could be skewing the monthly wage gain downward. The Federal Reserve is worried that service sector wages could provide a floor under inflation. Current wage gains are still a full percentage point above 2019 levels and more consistent with 3% than 2% inflation.

Separately, the unemployment rate jumped to 3.8% on an increase in labor force participation to 62.8%, The biggest jump was among white and Black teens, which could be a seasonal quirk linked to the start of the new school year. Women 55 to 64 years old had the largest increase of the older cohorts. Those over 65, who gained ground last month, lost ground in August. The surge in employment in the care economy could be opening doors for those who were either caring for grandchildren or older relatives.

Household employment actually rose by 222,000 during the month. Those gains were driven by a surge in those working part-time for economic reasons (e.g., their hours were cut). That could reflect the work stoppages in the motion picture and production industry. Multiple job holders fell slightly in August, after gaining some ground in July.

Workers out on strike remained at the highest levels since 2003. The UAW has put the automakers on notice for a potential strike on September 14. Warning notices by state of layoffs at plants associated with that potential strike picked up in Illinois, Michigan and Ohio in recent weeks.

The ranks of those out on vacation surged to the highest level for August since 2017. Those out unable to work due to illness crept up again in August. Some schools had to temporarily close after opening in August due to outbreaks of COVID, strep and other illnesses. That is above the levels we saw in 2019, but still below much of the last three years.

The effects of strikes were smaller than expected.

Bottom Line

The effects of strikes were smaller than expected, although they clearly hit those forced to work part-time for economic reasons. That suggests that many workers in the entertainment industry affected by the strikes lost hours but not their jobs. The rise in unemployment and the participation rate are welcome news to the Fed as they occurred without layoffs and could further ease wage pressures. However, the quirkiness of the seasonal adjustment in the data for August, combined with fewer weekends and a low response rate on the establishment survey, suggests we take the data with a grain of salt. Fed Chairman Jay Powell made clear that the Fed would take a breather in September and reevaluate whether to raise rates again in November. The forecast for a November hike is still less than a coin flip.

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