Summary: August non-farm payrolls increase by over 1 million; jobless rate down considerably even as participation rate increases; government jobs rise but private sector accounts for bulk of gain; employment-to-population ratio up for fourth consecutive month; underemployment rate down again but still in mid-teens.
The US economy ceased producing jobs in net terms as infection controls began to be implemented in March. The unemployment rate had been around 3.5% but that changed as job losses began to surge through March and April. May’s non-farm employment report represented a turning point as the US economy began to re-open. Subsequent months have continued to provide substantial employment gains.
According to the US Bureau of Labor Statistics, the US economy created an additional 1.371 million jobs in the non-farm sector in August. The increase was below the 1.5 million which had been generally expected and less than the 1.734 million jobs which had been added in July after revisions. Employment figures for June and July were revised down by a total of 39,000.
The unemployment rate dropped from July’s rate of 10.2% to 8.4%. The total number of unemployed decreased by 2.788 million to 13.550 million while the total number of people who are either employed or looking for work increased by 968,000 to 160.838 million. The rise in the number of people in the labour force raised the participation rate from July’s rate of 61.4% to 61.7%.
“Although some 230,000 of the public sector payrolls were temporary census workers, the 1 million-plus rise in private payrolls was decidedly solid,” said Westpac senior economist Elliot Clarke.
Long-term US Treasury yields shot up on the day. By the close of business, the US Treasury 2-year bond yield had crept up 1bp to 0.14%, the 10-year yield had gained 8bps to 0.72% while the 30-year yield finished 11bps higher at 1.47%.
In terms of US Fed policy, expectations of any change in the federal funds rate over the next 12 months retained a slight easing bias. OIS contracts for September implied an effective federal funds rate of 0.075%, about 1.5bps below the current spot rate.