While the Fed will surely be displeased that after two ~275K prints in a row, the US labor market stalled again by nearly 50%, with August payrolls rising only by 151K, what Yellen will be most focused on is not the number of jobs, but rather the wage growth, or more specifically the lack thereof. As we noted earlier, on an average hourly basis, in August wages rose only by 0.1%, below the 0.2% Wall Street hoped for, and the lowest monthly increase since February.
As usual, however, hourly wages gave only half the story, because the US economy is a product of aggregate hours and wages, and it was here that a major problem emerged. As the chart below shows, when looking at the largest private sector grouping of US payrolls, the total production and non-supervisory workers which amount to roughly 83% of the entire workforce, the aggregate hours worked rose just 1.1% over the past 12 month, the lowest increase since July 2010.
And the flipside to this was that average weekly earnings for all employees not only declined from $884.08 to $882.54 over the past month (with weekly earnings for production and non-supervisory workers likewise declining from $727.92 to $727.10), but that on an annual basis, the 1.5% increasewas the worst print in 32 months.
This report confirms what we showed several days ago, namely that the bulk of wage growth has gone to low-paid workers, however now that the tailwind of state minimum wage hikes has passed, the overall wage growth is sliding once again.
In short: if Yellen hikes into an environment in which wages are falling (and as reported last night, in which small businesses are seeing increasing delinquencies and are borrowing less), it will be nothing less than the Fed's attempt to push the economy into a recession.
http://www.zerohedge.com/news/2016-09-02/most-troubling-news-fed-todays-jobs-report
http://www.zerohedge.com/news/2016-09-02/wtf-chart-day-us-factory-orders-tumble-longest-streak-history
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Where The August Jobs Were
Having observed the quantitative aspect of today's weaker than expected previously, we look at the qualitative job additions in August where we find that, once again, the bulk of job additions went to lowest-paying jobs.
Here is the breakdown of the five best job categories:
- Minimum wage food services and drinking places - a component of leisure and hospitality - remained the highest growing subindustry curiously adding +34,000 jobs despite anecdotal evidence of increasing layoffs by restaurants across the country. Over the year, the industry has added 312,000 jobs.
- Education and health, the other low-paid category, saw the highest monthly increase, with 39,000 jobs added in the month.
- Last month's surge in Professional services is now gone, with only 25K jobs added in the sector.
- The "top 5" categories are rounded off by government, which added 25K jobs (as a reminder, government workers do not "produce" anything) and the minimum wage Retail Trade, which notched another 15K jobs, many of whom will soon be replaced by robots.
On the other side, the deterioration in the high paying jobs continued, with manufacturing, construction and high-paid mining and logging jobs all posting monthly declines of 14K, 6K and 4K respectively.
The other categories were largely unchanged, however the steep drop in temp help, which declined by 3K jobs in August, may be a harbinger of a slowdown in the jobs pipeline.
Some more details courtesy of our friends at Southbay Research, who write that the Industrial Recession is spreading and the Service Economy is Stable.
No major surprises: All trends forecasted by SouthBay were confirmed
- Industrial Recession spreads
- Energy sector has stabilized
- Big fat warning sign: Auto Payrolls shrink -6K
- Election year boost: Broadcasting payrolls continue to expand +2K
Supply Chain stalling:
- Manufacturing + Wholesale + Transportation Payrolls = +5K
Service Sector (+150K): Slower growth Under the Headline Number
- Weak growth at the margins: Temp Hiring has collapsed
- One-offs that won't repeat: ~30K
- Healthcare: one-time (+21K) boost from Social assistance
- Other: +7K for more organization hiring (??????)
Sector Drill Down: Mining and Oil Services continues to deteriorate:
Energy Payrolls (-4K): Signs of improvement
Construction drops (-6K): Major non-residential projects have ended or are ending, and less utility development is underway
Manufacturing (-14K): Broad-based contraction especially in auto payrolls (-6K). Payrolls are back to Sept 2015 levels. As mentioned in a previous report, these payrolls should be weighted heavily as a leading indicator of economic direction. Historically, the layoffs preceded recessions by ~9 months. I believe that the current situation is different because there are fewer workers in the auto industry, so the general flatness followed by contraction means that the indicator clock started as far back as March 2016.
Retail (+15K): Good weather and continued home price increases have led to strong gardening payrolls. However, these are really delayed layoffs, so this will be a headwind in 4QMeanwhile, department store payrolls (-3K) are weak as big box store closures begin.
Transportation (+15K) truck jobs barely registered (+3K)
Financial Services (+15K): Real Estate (+5K) & Obamacare (Insurance companies +5K)
Professional Services (+22K): White collar jobs (+20K) continue to grow
Healthcare: +36K on one-time (+21K) boost from Social assistance
Leisure & Hospitality = +29K on super-strong restaurant hiring (+34K). Expect this to be a headwind going forward because restaurants are ramping up layoffs.
http://www.zerohedge.com/news/2016-09-02/where-august-jobs-were
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