Unemployment Rate Jumps to 9.7%

The employment report for August provided mixed news. Bad news first: the unemployment rate jumped to 9.7% from 9.4% in July. The July number had been a bit of an anomaly when it fell from 9.5% in June, but it was entirely a function of a lower participation rate in the workforce.

The other bad news was that we lost more jobs in June and July than we thought we had. The latest revisions now show 463,000 jobs lost in June rather than the 443,000 we thought we had lost as of last month, and in July we actually lost 276,000 rather than 247,000.

The good news for August: we only lost 216,000 jobs, which was better than the consensus expectations of a loss of 230,000. If you want to look at private sector jobs, we were down only 198,000. I am not one of those who say that public sector jobs don’t matter, but public sector jobs are dependent on people being able to pay taxes from private sector jobs, so private sector jobs are key.

By sector, the job losses were close to equally split between the goods-producing sector, which lost a total of 128,000 -- 63,000 lost in manufacturing and 65,000 lost in construction. The private service sector lost 70,000, and 18,000 government jobs were lost.

The other good news was that average hourly wages rose by 0.3%, which was higher than expected. At least some of that was due to the higher minimum wage going into effect. That means that firms like McDonald's (MCD - Analyst Report) and Yum! Brands (YUM - Analyst Report) (or their franchisees) probably bore the brunt of the increase in wages. It does, however, mean that those people who do have jobs have a little more money to spend.

In the neutral news camp was the average workweek, which was unchanged at 33.1 hours.

I will follow up with at least one more post that digs much deeper into these numbers.

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