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Employment Situation
Released On 9/4/2009 8:30:00 AM For Aug, 2009
PriorConsensusConsensus RangeActual
Nonfarm Payrolls - M/M change-247,000 -200,000 -365,000  to -115,000 -216,000 
Unemployment Rate - Level9.4 %9.6 %9.4 % to 9.7 %9.7 %
Average Hourly Earnings - M/M change0.2 %0.2 %0.0 % to 0.3 %0.3 %
Av Workweek - All Employees33.1 hrs33.1 hrs33.0 hrs to 33.2 hrs33.1 hrs

Highlights
It's still ugly but not as ugly. Job losses eased in August while the unemployment rate rose on a reversal of July's questionable decline. Nonfarm payroll employment in August fell 216,000, following a revised decrease of 276,000 in July and a revised decline of 463,000 in June. The August contraction in jobs was close to the market forecast for a 200,000 dip. July and June revisions were down a net 49,000.

Although generally easing, job losses still were widespread. By major categories, goods-producing jobs dropped 136,000 in August, following a 122,000 decrease the month before. The August contraction was about evenly split between construction and manufacturing. Construction jobs fell 65,000 while manufacturing dropped 63,000. Service-providing losses were cut in half with an 80,000 decline after falling 154,000 in July.

On a year-ago basis, payroll jobs were down 4.3 percent in August-slightly worse than down 4.2 percent the previous month.

Wage inflation has warmed up a bit-likely due to a jump in the minimum wage. Average hourly earnings in August rose 0.3 percent, matching July's gain and topping the market forecast for a 0.2 percent increase. The average workweek held steady at 33.1 hours, matching the consensus expectation.

From the household survey, the civilian unemployment rate rebounded to 9.7 percent from 9.4 percent in July and compared to the consensus estimate 9.6 percent. As expected, the labor force increased after an unexpectedly large drop in July. The July number is the one that should be discounted-August is more realistic.

Today's report was mixed relative to expectations but close for all components. The bottom line is that labor market conditions are very slowly coming out of recession. A key point is "slowly." Going forward, the consumer sector almost certainly is going to be constrained for some time by high unemployment, job uncertainty, and sluggish income growth (increases in the minimum wage not withstanding).

Market Consensus before announcement
The consensus forecast is based on surveys as of August 28, 2009. With the just released August ADP decline greater than expected and the ISM manufacturing index better than expected, various individual payroll employment forecasts have been revised-some up and some down. Market expectations could change again with the September 3 release of jobless claims numbers. Nonfarm payroll employment in July shrank 247,000, following a revised decline of 443,000 in June and a revised drop of 303,000 in May. The July decrease in payroll employment was the smallest since a 175,000 decline for August 2008. Wage inflation returned more to normal in July as average hourly earnings rose 0.2 percent after no change June. The civilian unemployment rate unexpectedly slipped to 9.4 percent from 9.5 percent in June. But the decline was due to a sizeable drop in the labor force-which plunged 422,000 in July. Looking ahead, an easing in jobless claims suggests some further slowing in the rate of decline in job losses. However, the unemployment rate is likely to rebound with a jump in the labor force.

Definition
The employment situation is a set of labor market indicators based on two separate surveys in this one report. The unemployment rate equals the number of unemployed persons divided by the total number of persons in the labor force, which comes from a survey of 60,000 households (this is called the household survey). Workers are only counted once, no matter how many jobs they have, or whether they are only working part-time. In order to be counted as unemployed, one must be actively looking for work. Other commonly known figures from the Household Survey include the labor supply and discouraged workers.  Why Investors Care
 
[Chart]
During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month.
Data Source: Haver Analytics
 
[Chart]
The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy.
Data Source: Haver Analytics
 

 

2009 Release Schedule
Released On: 1/92/63/64/35/86/57/28/79/410/211/612/4
Release For: DecJanFebMarAprMayJunJulAugSepOctNov
 


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