ECONOMY & JOBS
U.S. Unemployment Rate Remains at Near-Historic Low of 3.7 Percent; African-American Unemployment Rate Hits New Series Low
September 6, 2019 5 minute read
Council of Economic Advisers
The Bureau of Labor Statistics (BLS) released its monthly Employment Situation Report, showcasing strong wage growth and steady employment growth. Total nonfarm payroll employment in August increased by 130,000 jobs. Including revisions for the months of June and July, the average pace of job growth has been a robust 173,000 jobs per month over the past year and 158,000 jobs per month so far in 2019. The CBO projected only 14,000 new jobs per month at this point in the cycle in its final pre-2016 election forecast, prior to enactment of the Administration’s pro-growth policies, so this month’s job growth is nearly ten times higher than the job growth CBO had anticipated for this quarter. In total, the economy has added over 6.3 million jobs since the President was elected, nearly 4.5 million more jobs than the CBO predicted would be created between the end of 2016 and the end of 2019:Q3 (figure 1).
The August jobs report also revealed that the labor market remains strong. Job gains have surpassed 100,000 jobs in 30 of the 33 months since the President was elected. Considering the unprecedented length of the expansion and the low unemployment rate, continued job growth at this rate is outstanding. In August 2019, just over 6 million people were unemployed, compared with more than 14 million in July 2009 at the beginning of the economic expansion.
The professional and business services sector led job growth in August, adding 37,000 jobs. The education and health services industry saw the second largest job growth, an increase of 32,000 jobs. Manufacturing jobs increased as well, gaining 3,000 jobs in August. Since the President’s election, the manufacturing industry has added 512,000 jobs and added 138,000 jobs in the past 12 months; manufacturing hours also increased over the past month.
In August, wages continued to grow as well. Nominal average hourly earnings rose 3.2 percent over the past 12 months, marking the 13th straight month that year-over-year wage gains were at or above 3 percent. Prior to 2018, nominal average hourly wage gains had not reached 3 percent in over 10 years (since April 2009). Wages for production and nonsupervisory workers increased by 3.5 percent over the past 12 months; production and nonsupervisory workers had the highest absolute increase in their average hourly earnings over the past month since the series began in 1964. When taking inflation into account, there is evidence that real wages are also growing. Based on the most recent Personal Consumption Expenditures (PCE) price index data from July, inflation in the past year was 1.4 percent, and based on the most recent Consumer Price Index (CPI-U) price data from July, the inflation in the past year was 1.8 percent (August inflation data is not yet available for either series). Assuming inflation holds steady this month, this translates into real wage growth of nearly $1,050 over the past 12 months for someone working 40 hours per week all year at the average wage rate, using the Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation measure. Since the election, this amounts to real wage growth of nearly $2,000 for someone working 40 hours per week all year at the average wage rate.
A separate household survey released by BLS shows that the unemployment rate remained at 3.7 percent in August, making August the 18th consecutive month at or below 4 percent. All Americans are benefiting from the strong labor market. The African American unemployment rate hit its lowest rate on record since the series began in 1972 at 5.5 percent (figure 2), the African-American adult female unemployment rate dropped to its lowest rate on record at 4.4 percent, and the African-American teen unemployment rate hit a new series low yet again, beating its record low from July. The Hispanic unemployment rate fell to 4.2 percent, matching its series lows from April and May 2019.
The labor force participation rate—which includes people who are working and those looking for work—edged up by 0.2 percentage point to 63.2 percent and is 0.5 percentage point above the rate when the President was elected in November 2016. The labor force participation rate for prime-age adults (ages 25-54), which largely avoids the demographic effects of the aging population, increased by 0.6 percentage point to 82.6 percent—1.2 percentage points above its rate in November 2016. The prime-age labor force participation rate for women increased 1.0 percentage point to 76.3 percent, its highest rate since February 2002. The employment-population ratio increased by 0.2 percentage point to 60.9 percent, the highest level since December 2008.
The Trump Administration’s pro-growth policies continue to move workers off the sidelines and develop an even more prosperous economy. Despite the continued low unemployment rates over the past year, there may still be potential workers who haven’t entered the labor market yet, a situation economists refer to as “labor market slack.” Because labor market slack still exists, employment can continue to rise and the economy can continue to grow as workers reenter the labor force. In August, 74.3 percent of workers entering employment came from out of the labor force rather than from unemployment.
The August employment data demonstrate that the American economy remains strong, with robust wage growth, a low unemployment rate, and strong job gains.
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