The U.S. Economy Created 187,000 Jobs in August… The unemployment rate rose a bit, from 3.5% to 3.8%.
What it means— It’s all about the revisions this month. The U.S. Bureau of Labor Statistics (BLS) revised the June jobs number from 185,000 to 105,000 and the July number from 187,000 to 157,000. These revisions allowed the BLS to show slower employment in previous months and rising employment last month. The rising unemployment rate last month reflected the rising participation rate, up by 0.2% to 62.8%, rather than job losses. Average hourly earnings rose by 0.2% last month and are up 4.3% over the last year, which is good, but that doesn’t make up for two years of strong inflation.
Job Openings Fell to 8.8 Million Last Month… It was the lowest number of job openings since May 2021, more than two years ago.
What it means— Job openings crested at just over 12 million in March 2022, about a year after the government mailed the last stimulus checks to consumers and also when the Fed started raising rates. But we should check ancient history, B.C. (before coronavirus), to put these numbers into perspective. From May 2018 through early 2020, job openings were hovering at record highs around seven million. The eventual high in March 2022 was 70% higher than that, and the current level still is higher than anything seen before the pandemic.
As a reminder, in the late 2010s we were swamped with stories about very low unemployment and too many job openings leading to inflation. While the jobs openings are moving higher, the current level doesn’t yet qualify as “normal.” A return to normal would be closer to the pre-pandemic level of 4 million. There’s still a long way to go.
Personal Consumption Expenditures Index Rose 0.2% Last Month, Is Up 3.3% Over the Past Year… The core Personal Consumption Expenditures Index (PCE) inched up from 4.1% to 4.2%.
What it means— The report didn’t faze investors because the numbers are much lower than at the same time last year, but that’s a mistake. The Fed favors PCE, because this statistic quickly incorporates spending substitutions when prices jump. If ribeye steak prices soar by 20% and consumers switch to sirloin, then the PCE includes the lower spending on the cheaper meat as inflation, basically calculating your fall to a lower standard of living.
It’s worrying that the PCE shows our prices continuing to rise even after we change our purchasing habits. We will be dealing with higher prices for months to come, which will make daily living harder. However, consumers still have sidelined cash in checking of $4.5 trillion compared to $1.2 trillion pre-Covid. In addition, there is $5 trillion in money market funds versus next to nothing pre-Covid. All that cash will sustain spending longer than expected.
Despite alarming reports of increasing credit card balances interpreted as hard pressed consumers, inflation adjusted July data shows consumers saved $706 billion. The saving may have paid down debt or bought investments.
- Total income from all sources, including transfer payments: $22.87 trillion
- Disposable income (total income minus taxes and contributions to social insurance): $19.97 trillion
- Spending on goods and services: $19.26 trillion.
- Consumers saved (didn’t spend): $706 billion
Student loan payments resume this month for the first time in more than three years, we might see a dip in consumer spending that takes a bit of pressure off of inflation. Maybe the central bankers will stand pat in September, but if employment numbers remain strong, expect the Fed to raise rates one more time this year.
Georgia Man Accused of Stealing Neighbor’s 8’x10’ Front Porch… To be fair, the porch wasn’t connected to anything. The porch was about three feet off the ground and well-constructed, but it’s hard to call it a “front” porch when there wasn’t a dwelling on the property. The owner reported the theft and the police were investigating when they got a break. The authorities were called to Robin Swanger’s home for a domestic disturbance; he had fought with his wife and thrown rocks at their home. The police charged Swanger with two counts of domestic violence plus one count of felony theft for swiping the porch.
Data supplied by HS Dent Research
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