Friday, the Bureau of Labor Statistics reported an additional 156,000 jobs were added during August, far below the month’s previous expectations.
However, experts responded well to the report, one even described this weaker report as a “Goldilocks” report, not too strong, but not too weak.
“For the markets, it is a Goldilocks report which is strong enough to keep the recovery going and weak enough to keep the Fed from tightening too aggressively,” said Brent Nyitray, iServe Residential Lending director of capital markets. “Construction, professional business services, and manufacturing were the biggest contributors to job growth.”
Other experts agreed, saying the new report would not affect the Federal Reserve’s decision on a rate hike later this month.
“Today’s employment situation report was neither exciting nor depressing, with 156,000 non-farm payroll jobs created in August,” said Mark Fleming, First American Financial Corp. chief economist. “This is a sufficient level of job creation that the Federal Reserve expects is needed for the new entrants into the job market every month.”
“I believe these August results neither dissuade nor encourage, relative to the economic facts known yesterday, the Federal Open Market Committee to materially change its opinion of whether to raise rates later this month,” Fleming said.
One economist acknowledged the job numbers were disappointing, but agreed August’s report will not change the Fed’s decision at its September meeting.
“These numbers followed strong results for recent months, and the three-month average monthly job gain of 185,000 points to a solid job market,” Fannie Mae Chief Economist Doug Duncan said. “While we are yet to see any acceleration in nominal wage gains, declining inflation this year is a positive for workers.”
“Following a recent string of lackluster housing data, today’s report provides some hope in the form of a strong pickup in residential construction hiring,” Duncan said. “Overall, we see nothing to stop the Fed from continuing its gradual monetary policy normalization, as we expect it to announce a tapering of its balance sheet during its meeting later this month.”
However, not everyone agreed with this outlook on August’s job numbers, and one expert insisted this report further confirms the next rate hike will not occur until 2018.
“Job growth disappointed in August, with employment gains falling shy of expectations and downward revisions to prior months,” said Curt Long, National Association of Federally Insured Credit Unions chief economist. “The unemployment rate ticked up even as growth in the labor force slowed.”
“Wages increased by just three cents per hour,” Long said. “The labor market is still in fine shape, but this report will augment the arguments of those in the Fed who want to hold off on a rate hike until inflation strengthens. NAFCU continues to believe that the next rate hike will be in 2018.”
The National Association of Realtors explained this report follows the theme for this year’s economy, which continues to change between good and tolerable. But, the association explained the increase will be enough to see a jump in housing demand.
“It has been a humdrum economy so far this year, seesawing between good to tolerable, yet certainly not great,” NAR Chief Economist Lawrence Yun said. “Nonetheless, the 12-month job gains total still tops 2 million, and that will likely grow household formation and home buying demand. The job figures in July assures that interest rates will likely remain low for a longer period.”
And of course, economists focused on the sudden uptick in construction jobs, saying that, while welcome, much more are still needed. In fact, after Hurricane Harvey, construction labor shortages could get worse before they get better.
“Construction employment was a highlight in this report with 28,000 jobs added in August,” Redfin Chief Economist Nela Richardson said. “But the supply of workers in this industry still severely lags the demand needed and the problem is getting worse. Job openings in construction continue to grow at double-digit rates from a year ago while wages are growing barely above inflation.”
“The construction industry is between a rock and a hard place,” Richardson said. “As we saw last month, the supply shortages are finally starting to push up wages. Yet builders can’t easily pass on higher wage costs to homebuyers, because home prices are already challenging consumer budgets. Harvey’s aftermath will further amplify this disconnect between the economy’s need for more construction workers and the wage it’ll take to attract them.”
