Lyngen said fed funds futures showed odds of a December hike at 58 percent, up from 52 percent before the jobs report. Wage growth has been a missing element in the economic recovery and had paralleled sluggish inflation. Now, both are picking up, seemingly ending a quandary for the Fed with core inflation running over its 2 percent target for now.
The unemployment rate remained at 3.9 percent, while economists had expected it to decline by a tenth of a point. While more jobs were added in August than expected, there was a 50,000 downward revision in June and July jobs, bringing the three month average down to 185,000. The participation rate was also disappointing, dropping 0.2 to 62.7 percent, the lowest level in 15 months, possibly due to retiring workers.
“One month does not a trend make,” said Diane Swonk, chief economist at Grant Thornton. “We still have not kept up with overall inflation. It’s still a waiting game in terms of what compensation packages will look like, but they’re improving. You’re starting to get some better quality in here. That’s what you want in an expansion. You want better quality. It’s still a shadow of what we had in the 1990s, … but that’s the trend you want to ride.”
In many ways, the August jobs report does reflect an improved labor market and more confidence on the part of employers — and workers.
“Job Leavers as a percent of unemployed, a measure of those having confidence in leaving their market for greener pastures (aka, higher wages) rose to 14 percent, the highest since October 2000,” wrote Peter Boockvar, chief investment officer at Bleakley Financial.
Another example of an improved labor environment was the fact that 80 percent of the 53,000 professional and business services hires last month were in permanent positions, as opposed to temporary, said Swonk.
Temporary workers “used to make up over half, particularly early on in the expansion. That’s a real shift. … That really is a commitment to benefits,” she said. “It shows a shift to hire up millennials.”
Ward McCarthy, chief financial economist at Jefferies, said the wage growth is probably even better than it looks since wages appear to be statistically depressed by the fact that higher-paid baby boomers are retiring and being replaced by lower paid, younger workers.
He said job growth usually disappoints in August, but this year the jobs report broke a long running trend.
The most August hires were in professional and business services, a category that has grown by 519,000 jobs over the last year. There were 33,000 new health-care jobs and 23,000 construction jobs, but manufacturing showed a surprising loss of 3,000 jobs.
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