August data was disappointing, showed weak growth for construction jobs
The US economy added 130,000 jobs in August, fewer than had been expected; and that means bad news for the housing market.
With economists expecting figures more in line with July’s 159,000, the weakness in the labor market adds fuel to fears of a slowdown, especially as 25,000 of the jobs reported in August were temporary government jobs for the census.
“This morning’s job report is consistent with our forecast of a gradually slowing economy, even though the payroll numbers were below our forecast,” said Doug Duncan, chief economist at Fannie Mae. “Job growth for the previous two months was revised downward again, the fourth consecutive month of downward revisions to prior months. Manufacturing employment posted a relatively weak gain this month, as firms might be expressing caution in the face of global uncertainties.”
Duncan added that jobs in residential construction (including specialty trade contractors) increased by the smallest amount since April.
“A disappointing number given that a robust increase in construction is required to alleviate the affordability challenges faced by homeowners and renters,” he said.
Increased wages among the positives
While the number of jobs fell, wages edged higher.
Average hourly earnings continued to grow at a solid year-over-year pace of 3.2%, and the average workweek also increased.
“The household survey contained good news, with the unemployment rate holding steady and the labor force participation rate increasing two-tenths,” said Duncan. “In fact, the labor force grew by more than one-half million persons, the largest gain this year, as more workers continue to return from the sidelines.”
Odeta Kushi, deputy chief economist at First American said that this increase in wages was good news for the economy with 70% of economic growth driven by consumer spending and the outlook remaining positive.
“Higher wages prompted a 2.7% increase in household income in August, the highest rate of growth since March of this year,” she said. “While recent yield curve inversion stokes the flame of recession talk, measures of the real economy – such as jobs and wage growth, remain strong. Indeed, it is household income that drives consumer spending and house buying, so it appears the US consumer remains healthy and poised to spur more growth.”
