"These include a drop in the unemployment rate to 5.1%, which is into the band the Fed regards a full employment. In addition the work week rose to 34.6 hours, matching the cyclical high from a revised 34.5 hours in July. Average hourly earnings rose 0.3% to a 2.2% year-over-year rate.
Job growth in July was revised to 245k from 215k, while the June estimate was revised up by another 9k also to 245k. While most sectors added jobs, manufacturing shed 17k jobs in August, which is the most since July 2013. We note that the gap between the service ISM and manufacturing ISM is the widest in several years. Moreover, the frustratingly lowflation is a function of deflation in goods prices and above 2% inflation in the price of services.
There were a couple of mitigating factors besides the loss of manufacturing jobs and weakness in the headline nonfarm payrolls that are worth mentioning. The participation rate failed to rise, and instead remained stuck at 62.6%. The consensus expected a small increase. In addition, part of the increase in hourly wages may be a function of survey period ending on August 15, when bimonthly payroll checks are often distributed, which could skew the data. Nevertheless, on balance the report appears broadly consistent with recent trends, showing the US labor market continues to heal and slack continues to be absorbed."
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