United States

Private sector hiring takes late summer break


Private sector hiring appears to have gone on holiday as the monthly guesstimate at the Bureau of Labor Statistics (BLS) showed a slowdown in overall job creation. The Federal Reserve and forward-looking investors will likely look right past this report and continue to focus on the underlying trend in employment and sluggish wage growth. The recent trend of job creation near 230,000 per month, which is not particularly impressive, will reassert itself in coming months as modestly above-trend economic growth continues. The far more important question is: Will that result in acceleration in average hourly earnings?

The unemployment rate declined modestly to 6.1 percent, the more relevant U6-U3 spread fell to 5.9 percent, and 7.2 million individuals are involuntarily working part-time.  While, average hourly earnings will likely pick up from the current year ago pace of 2.1 percent, we anticipate an increase to a historically soft 2.5 percent 12 to 18 months from now. For middle market employers, this job report will likely call into question the sustainability of aggregate demand and does not bode well for the real economy.  Even if one discounts the August data, the underlying momentum in private sector job creation and wages are not sufficient to create conditions consistent with a wage price spiral, thus the onus is on central bank policymakers to move cautiously to avoid a premature rate hike campaign in 2015.


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