August Nonfarm Payrolls Grow by Just 124,000

Fresh weakness in manufacturing payrolls and a drop in construction payrolls depressed the jobs component of the August employment report, which also surprised on the weak side with a very bullish 0.2% increase in average hourly earnings.

Nonfarm payrolls grew by just 124,000 in August vs. an average forecast among economists surveyed by Reuters for a 220,000 gain. The average gain over the last 12 months is 228,000. The July payrolls gain was revised up to 338,000 from 310,000.

Employment Report at a Glance
	August	July Revised	July Original
Nonfarm payrolls	+124,000	+338,000	+310,000
Service-sector payrolls	+219,000	+270,000	+260,000
Manufacturing payrolls	-63,000	+51,000	+31,000
Construction payrolls	-29,000	+14,000	+22,000
Unemployment rate	4.2%	4.3%	4.3%
Average hourly earnings	+0.2%	+0.3%	+0.5%
Average workweek	34.6 hrs.	34.5 hrs.	34.5 hrs.
Manufacturing workweek	41.7 hrs.	41.9 hrs.	41.9 hrs.
Source: Labor Department

Service-sector payrolls, the biggest ones, advanced at a healthy 219,000 pace, a bit weaker than their 12-month average gain of 244,000. But manufacturing payrolls, which in July grew for the first time in 11 months (the gain was revised to 51,000 from 31,000), contracted anew, losing 63,000 jobs. Some economists correctly predicted the reversal, arguing that while the manufacturing sector is on the rebound, the July rebound was too large to be sustained. Construction payrolls, for their part, lost 29,000 in August.

The 0.2% increase in average hourly earnings compared to an average forecast for a 0.4% gain gives investors hope that the Fed will see fit to leave interest rates where they are for the balance of the year. The labor market is tight (the unemployment rate, another component of the employment report, dropped to 4.2% in August from 4.3%, in line with expectations), but the wage pressures that appeared to be building in the previous few months have retreated.

The report's fourth and final component, the average workweek, lengthened to 34.6 hours from 34.5 hours in July. The consensus estimate was for an unchanged workweek.

>To order reprints of this article, click here: Reprints