U.S. Labour Markets Worsens in August

Daily Forex Fundamentals | Written by TD Bank Financial Group | Sep 05 08 14:41 GMT |

* U.S. nonfarm payrolls declined by 84K in August, which was slightly worse than the market expectations for a 75K drop.
* But the report was even more sour below the surface, and suggests that the deterioration in the U.S labour market has continued unabated.
* The unemployment rate surged to 6.1%, compared to the market consensus for an unchanged print of 5.7%.

The U.S. economy lost an additional 84K jobs in August, bringing the total amount of jobs lost so far this year to a whopping 605K. The decline in August was slightly worse then the 75K drop expected by the markets, and comes on the heels of two big monthly declines in June (-100K, which was previously reported as -51K) and July (-60K, previously reported as -51K). In fact, the decline in June was the first triple-digit employment loss in this cycle. The 3-month average now stands at a whopping -81K. And with a further 250K workers entering the labour force, the unemployment rate surged to 6.1% (from 5.7% in July), which is the highest level of unemployment since August 2003. On the wages front, the average hourly earnings rose for the first time since March, rising to 3.6% Y/Y from 3.4% Y/Y in July, while average weekly earnings also edged higher to 3.3% Y/Y from 3.1% Y/Y. This turns out to be the only strong aspect of the report.

The details of the report were fairly sour. The entirety of the losses were in the private sector, which lost 101K jobs in August, and losses in this component has now increased to a whopping 772K jobs since December last year. The breakdown between the service and goods sectors was equally disturbing; with the goods sector losing 51K, while 27K jobs were lost in the services sector. There were declines in employment in all sectors of the economy, with the exception of education and health (+55K) and government (+17K). On the other hand, there were sizeable losses in manufacturing (-61K), trade and transportation (-35K), and business services (-53K).

With this report, there appears to be no end in sight to the distresses in the U.S. labour market, and little to suggest that the much longed-for improvement in labour market conditions is any closer. Moreover, it also suggests that the headwinds facing U.S. consumers are gaining strength. In terms of the Fed, the report will likely give further fodder to the doves on the FOMC, though we believe that it is unlikely to change the current monetary policy stance of the Fed in any meaningful way.

TD Bank Financial Group

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