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August 2017 Jobs Report

Job Gains Not Too Hot, Not Too Cold

Tuesday, September 5, 2017

The U.S. economy added 156,000 jobs in August, according to the U.S. Bureau of Labor Statistics (BLS), less than many economists predicted but a clear sign that the economy continues to create jobs and chug along. The unemployment rate ticked up to 4.4%, thanks to a slight increase in the civilian labor force.

This BLS report did not include any effects of Hurricane Harvey on the employment situation in Houston and elsewhere, as the data was mostly collected by the time the storm made landfall on Aug. 25.



Nation’s Capital Leapfrogs into Top 4

Has the Great Recession Permanently Damaged the Labor Force?

By the Numbers

Revisions to the previous two months’ numbers resulted in a net total decline of 41,000 jobs to the estimates. June’s job-gain figure of 231,000 was revised downwards to 210,000, while July’s was revised down from 209,000 to 189,000. August’s monthly number was 19,000 jobs fewer than the 12-month average (175,000) but 51,000 less than the monthly average from September 2015-August 2016.

Annual job growth clocked in at 1.4%, 10 basis points (bps) less than July 2017 and 30 bps less than August 2016. Annual job gains were 2.097 million, 383,000 less than August 2016’s total and the first time the annual rate dipped below 2.1 million since April 2013.

Average hourly earnings (wages) for privately employed workers continued to rise moderately, with August’s average of $26.39 representing a 2.5% increase from a year ago, just about the same rate as the 12-month average (2.6%). Annual wage growth has remained close to 2.5% since September 2015, but is an improvement from the 1.9%-2.1% average for 2010-2014.

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June’s U3, or “headline,” unemployment rate of 4.4% was up from 4.3% in July. The civilian labor force participation rate was unchanged from last month, but up 10 bps to 62.9% from last year. The employment-population ratio of 60.1 ticked down 10 bps from the previous month but was 40 bps higher than August 2016.

The number of part-time workers for economic reasons (5.26 million in August) decreased by 27,000 from July, and was down by 772,000 from August 2016. The U6 unemployment rate, which includes these part-timers and marginally attached workers, remained at 8.6% in August, a level it has maintained since April.

The number of long-term unemployed (27 weeks or more), seasonally adjusted, fell by 45,000 from July to 1.74 million. The average duration of unemployment fell by three weeks from August 2016 to 24.4 weeks, and was down by half a week from the previous month. The number of multiple jobholders decreased by 273,000 from August 2016 to 7.0 million, and the number of discouraged workers not in the workforce (448,000) decreased by 128,000 from one year ago.

Industry Focus

The not seasonally adjusted unemployment rate for the Leisure & Hospitality industry fell the most in August from last year, dropping 140 bps while oil and gas extraction fell 90 bps to 4.5%. Construction and Transportation & Utilities each dipped 40 bps. The remaining industry sectors dropped from 10-30 bps with the exceptions of Other Services (unchanged) and Information (up 10 bps from August 2016).

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The most significant job gains for August occurred in the Professional and Business Services (+40,000), Manufacturing (+36,000), Construction (+28,000), and Education & Health Services (+25,000) sectors. The Information (-8,000) and Government (-9,000) sectors recorded net job losses.

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  • The Professional and Business Services supersector’s job gains were primarily in the high-paying professional and technical services (+22,400) subsector, with the administrative and waste services subsector adding an additional 17,900 jobs.
  • Manufacturing had another very strong month for durable goods (+28,000), with sharp gains in motor vehicles and parts (+13,700), fabricated metal products (+5,200) and computer and electronic products (+3,900). Nondurable manufacturing was up 8,000 jobs, mostly in the food manufacturing (+6,600) subsector.
  • Home building is helping the Construction industry, as the residential specialty trade contractors (+11,500) subsector dominated this supersector. Significant gains occurred in the heavy and civil engineering construction (+6,600) and construction of buildings (+5,300) subsectors.
  • The health care (+20,200) subsector accounted for the majority of gains in the Education & Health Services industry in August. Educational services added 8,600 jobs as students returned to school in August.
  • Other Services (+16,000) saw a jump of 12,300 jobs in membership associations and organizations.
  • Financial Activities (+10,000) benefitted from solid gains in the real estate and rental (+6,800) and finance and insurance (+2,900) subsectors.
  • Trade, Transportation, and Utilities increased by 8,000 total jobs. Wholesale trade added 6,300, while retail trade was virtually flat (+800) and transportation and warehousing added another 1,900 jobs. In the retail trade sector, job gains in building material and garden supply stores (+4,500) and other general merchandise stores (+3,400) were offset by losses in the miscellaneous store retailers (-3,200) and health and personal care stores (-2,300) subsectors.
  • The Mining and Logging (+6,000) supersector continues to add jobs in the support activities for mining subsector (+6,800), while logging lost 800 jobs.
  • Leisure and Hospitality (+4,000) turned in a weak performance in August. Gains in the food services and drinking places (+9,200) and amusement, gambling and recreation (+6,000) subsectors were offset by losses in performing arts and spectator sports (-9,000).
  • The Information supersector’s 8,000-job loss in August was felt across virtually all subsectors, with only other information services (+1,700) contributing gains to offset losses in the motion picture and sound recording (-4,900), telecommunications (-2,700), publishing (-1,400), data processing (-600) and broadcasting (-500) subsectors.
  • Government industry job losses were spread across the state (-5,000), local (-3,000), and federal (-1,000) levels.

Nation's Capital Leapfrogs into Top 4

All of last month’s top 10 job-gain metros returned to the list in July (the latest metro figures available), but several changed positions and one shot up the list.

New York, Atlanta, and Dallas remained the top three job-gainers in order among Axiometrics’ 120 ranked metros, as they were last month, but Washington, DC vaulted to No. 4 from No. 10 last month, displacing Los Angeles down to No. 5. Minneapolis-St. Paul fell from No. 5 to No. 8, but Boston remained at No. 6, while Houston, pre-Harvey, moved up one spot to No. 7. Phoenix fell two spots to No. 9, and Riverside slipped one spot to No. 10.

Together, the total jobs created in the top 10 metros for the 12 months ending in July were up 10.9% from June’s annual total (699,500 vs. 630,700), and up 10.2% from the 12-month total for July 2016 (699,500 vs. 634,700).

Other major metro movers include: Miami improved from No. 27 to No. 22, Baltimore moved up from No. 46 to tie Philadelphia for No. 30 (up from No. 38), and Raleigh from No. 42 to No. 35. Moving down the list were several California metros: San Diego (No. 25-No. 32), San Francisco (No. 26-No. 36), San Jose (No. 43-No. 54) and Anaheim (No. 39-No. 53). In addition, the Midwest metros of Cleveland, Chicago and Indianapolis fell at least 10 spots on the Top 120 list.

Annual job growth slowed in only four of the top 10 markets in July:

  • Phoenix (-119 bps)
  • Los Angeles (-98 bps)
  • Dallas (-41 bps)
  • Riverside (-26 bps)

Job growth was up in:

  • Atlanta (+5 bps)
  • Boston (+23 bps)
  • New York (+31 bps)
  • Minneapolis (+89 bps)
  • Washington, DC (+97 bps)
  • Houston (+186 bps)

Newark and Knoxville improved enough to climb out of the bottom five from last month with positive job gains, but Mobile, Greenville and Virginia Beach returned to the list. Akron, OH and Columbus, GA joined the bottom five in July. Akron lost jobs in Manufacturing, Trade, Transportation and Health Care, while Columbus demonstrated weakness in Retail Trade and Professional & Business Services.

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Access the current job-growth spreadsheet here.

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Has the Great Recession Permanently Damaged the Labor Force

Much has been written and discussed about the labor force participation rate (LFPR) and its steep decline after the Great Recession. After peaking at 67.1% from 1997-1999, the not seasonally adjusted rate of labor-force participation declined slightly to about 66% from 2003-2008 and then fell off a cliff, plunging to a low of 62.5% in 2015. It has since ticked up slightly to 62.6% in 2016 and improved further to 62.9% in the second quarter of 2017. The not seasonally adjusted rate is used in this analysis to allow comparison among and between different age cohorts.

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As seen in the preceding chart, the LFPR has been much lower than even the current rate, but that was a time when women were coming into the labor force in large numbers.

The argument has been made that the LFPR may never return to the levels it reached before the Great Recession. Others argue that with more than 94 million adults out of the labor force, the pool of potential workers is large enough to keep the current rate of job growth and gains going for some time. Perhaps something in the middle will occur.

One of the major reasons often cited for LFPR decline is larger and larger numbers of retiring baby boomers. While that certainly accounts for a significant portion of the decline, it could also be attributed to younger generations’ inability to maintain participation rates they have historically held.

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The chart above illustrates the LFPR for the baby-boomer, Gen X and millennial generations from the time the oldest member of each generation reached working age (16) to current. The gold line represents baby boomers and runs from 1961-2016 for an age range of 16-71. In other words, those 16-year-old workers in 1961 reached age 71 in 2016. The oldest Gen Xers (blue line) reached working age in 1981 and were age 51 in 2016. Millennials (red line) hit working age in 1998, and their oldest members are about 34.

Charting each generation side-by-side by age reveals that all three generations have a short period of decline from age 16-19 as students leave the workforce temporarily before returning in force after college or military service. The large gap between boomers and the other two generations from age 16-20 is likely the result of the aforementioned imbalance of men to women in the workforce in the early 1960s and the Vietnam War draft.

Gen X workers have had a much stronger arc in their participation rate compared to both baby-boomers and millennials – at least from ages 20-36 – but they came of age during some of the strongest economic growth periods since World War II. That age range for Gen X corresponds to the years 1985-2002, a period that had only two mild and short recessions.

From about age 19-26, boomers and millennials had very similar participation rates but diverged when the oldest millennials hit 27 and the recession took hold in 2009. Since then, millennials’ participation rates have underperformed the trajectory set by baby-boomers of a similar age, and the gap has only grown over time. The LFPR of Gen Xers also has underperformed the same age range for baby-boomers over the past seven years, and although the rate is still good at more than 81%, boomers averaged an LFPR of close to 85% during their age 44-51 period.

Finally, the post-recession LFPR for baby-boomers has seen a dramatic drop off, from 74.1% in 2009 to 53.5% in 2016. As mentioned previously, a large part of this is likely retirement (voluntary or not) as the age range of the oldest baby boomers moved from 64-71.

A final factor that could be affecting the declining LFPR is the size of the populations of each generation. As the name implies, baby-boomers were the largest generation in population that the country had ever seen. Now that many of them are retiring, it is taking a large percentage of the U.S. working-age population out of the workforce. To some extent, they are being replaced by millennials as they age into the workforce (the youngest millennials were age 16 in 2016), but as seen in the previous chart, their LFPR has not kept pace with the boomer generation of the same age.

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In the past few years, millennials overtook baby boomers as the largest generation by population (see chart above), but if they are unable (or unwilling) to join the labor force at or near the rates seen by previous generations, the long-term outlook for the country’s labor force may be stunted for several years.

By the Numbers

The following table shows July 2017 (the latest data available) metropolitan-area job gain and job growth, some grouped by state or region.

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