August 2018 U.S. Jobs Report Overview: LPP EP 38

In this #LetPeopleProsper episode, I discuss the good, bad, and my take on the August jobs report by the U.S. Bureau of Labor Statistics. Overall, a good report but weaknesses remain. 

Here are the key points of the report:

1. Nonfarm jobs: Up 201K last month, which was above expectations of 191K, but the prior two months were revised lower by a total of 50K. Manufacturing lost 3K jobs last month but are still up year-over-year, though this could be a signal of weaker growth due to foreign trade uncertainty. 
2. Unemployment rate: Remains at 3.9%, lowest rate in almost 18 years. However, the last time the rate was this low was in December 2000 when the U6 unemployment rate, which includes underemployed and discouraged workers, was 6.9%, but that rate is now 7.4% though falling quickly in recent months. A better signal of the labor market's strength is the employment-population ratio for the prime age group (25-54 year olds) because it teases out the baby boomers retiring and young adults not entering the labor force as much as before. That rate ticked down to 79.3% from 79.5% and still has a bit to go to get back to the 80% rate before the Great Recession, though it too has been increasing rapidly in the last year or so. 
3. Wages: Up by 2.9% in last twelve months and beating expectations of a 2.7% increase, though just keeping pace with measured price inflation so real wages haven't increased much. However, the pace of wage growth along with total compensation growth has helped consumer confidence reach near record highs. In addition, higher wages increase expectations that firms will raise prices to cover these higher costs of doing business, contributing to an expectation that the Federal Reserve will continue to raise the target for the federal funds rate, which I argue has already been too low for long so this is a good step. 

In general, the increased strength of the labor market has been a product of the regulatory and tax relief last year. A good sign as the Trump administration has started to follow more of hte prosperous Texas model.

​Let's hope that continues to #LetPeopleProsper.