Below Trend Jobs Growth Disappoints, but No Change in Outlook

The United States created 142,000 jobs in August, well below the six- and twelve-month averages of 240,000 and 212,000 jobs, respectively. The unemployment rate ticked down to 6.1%, driven by a lower labor force participation rate, and average hours worked was flat. Digging deeper into the jobs report, however, we see bright spots. Construction jobs, viewed as a gage of labor market health, posted a second month in a row of strong improvement. Additionally, it was another month of net growth for public sector jobs, which maintains the positive reversal in that sector.  Economist Ben Casselman, via Nate Silver’s Five Thirty-Eight blog, notes readers should not overreact to the lower-than-expected print because “monthly jobs numbers are notoriously volatile.” The margin of error for any one report is 90,000 jobs, he argues. “It’s too soon to know whether this was a one-month blip or, for that matter, a statistical oddity that will be revised away in coming months.”  We see the headline number as disappointing, though not a fatal prognosis for the U.S. Economy, just an indication of a slower healing process.  At the margin, Policy Rate increases may be delayed slightly, but we are taking Cassleman’s advice and not panicking. Our call remains for higher interest rates driven by economic growth.