U6 Fix
September 6, 2024
It’s a Question of 25 or 50 for the Fed
Job growth rebounded modestly in August as employers added 142,000 new workers to their payrolls. Data for June and July were downwardly revised to show 86,000 fewer jobs created than previously reported. This jobs report and the revisions to the prior months corroborate the fact that the labor market is cooling. Yet there are no signs that it is about to fall off a cliff. The Fed has made it clear that a rate cut is coming at the September meeting. The question is, will the cut be 25 or 50 basis points? With inflation still sitting close to 3 percent, the Fed needs to balance the risk between ensuring inflation continues to move toward its 2 percent target and not falling behind on a labor market that has continued to soften.
Employers added 142,000 new hires to their payrolls in August, according to the Bureau of Labor Statistics. Private-sector firms hired 118,000 new workers, an uptick from the 74,000 hired in the prior month. Government hiring rebounded to 24,000 new employees from 15,000 in July. Goods-producing industries added just 10,000 new workers, half of the pace from July. Construction led the sector higher as 34,000 workers were added to the payrolls. Manufacturers, meanwhile, shed 24,000 jobs in August. Service-providing industries employment doubled to 108,000 from 54,000 in July. Hiring in the health care and social assistance services sector remained strong, gaining 44,100 jobs. The pace of hiring in leisure and hospitality climbed by 46,000. Employment in temporary help services continued to drag, cutting 2,900 jobs. The information services sector also saw job losses totaling 7,000 in August. Data for June was revised down by 61,000 and the change for July was cut by 25,000. Combined, employment gains were 86,000 lower than previously reported.
The unemployment rate ticked lower to 4.2 percent, after reaching 4.3 percent in the prior month which was the highest level since October 2021. The labor force participation rate held steady at 62.7 percent as just 120,000 workers entered the labor force. The household and payroll surveys continued to move in the same direction. According to surveyed households, the number of employed rose by 168,000, while the number of unemployed dipped by 48,000.
Gains in average hourly earnings jumped 14 cents in August – a 0.4-percent monthly gain. Earnings were up 3.8 percent from a year ago, an uptick from the 3.6 percent reported in July. Average hourly earnings for production and non-supervisory workers increased by 11 cents, for a 0.4-percent monthly gain.
Data junkies, here’s your fix: The August U-6 (the broadest measure of unemployment) ticked up 0.1 percentage point to 7.9 percent amid an increase in those employed part time for economic reasons. It was the highest reading since October 2021.
