Link
The US labour market is still showing no signs of a real downturn. The number of jobs created over the month was 187,000, but this figure could have been much higher had it not been for the bankruptcy of a major company in the transport sector and strikes in the film industry. In particular, job creation continued in the vast majority of services, with the health and catering sectors continuing to enjoy a favourable momentum.
Despite this strong job creation, the unemployment rate rose by 0.3 points to 3.8%. The reason for this rise is the massive influx of new entrants to the labour market, according to the household survey. The survey reveals that employment rose by 222,000, while the working population increased by 736,000 !
Fig.1 United States: The unemployment rate, which rose to 3.8% in August, was mainly due to a massive influx of new entrants.
This only goes to show the robustness of the market. Overall, the participation rate has risen to 62.8%, the highest since the post-covid recovery, but is still 0.4 points below the pre-covid rate. While the take-up rate among 25-55 year-olds has returned to its pre-covid level, the rate among senior citizens (55+) is still a long way off, even though August saw a very sharp rise in take-up among this segment of the population.
Fig.2 United States: The participation rate continues to rise. While the 25-54 age group has returned to pre-covid levels, the over-55s are still very low.
So, whether it's the household survey or the business survey, the message is the same: August was a very strong month in terms of job creation.
Fig.3 United States: Household and business surveys give the same message about the robustness of job creation
The question, of course, is whether these strong job creations will put additional pressure on wages. The survey reveals that wage increases have eased compared with last month, with hourly earnings up by just 0.2% over the month, compared with 0.4% in July. Year-on-year growth slowed to 4.3%, which is still far too high to bring inflation down to 2%.
In any case, we will have to wait for other statistics on wages, with fewer distortions in their composition, to get a clearer view of the trend.
Fig.4 United States: Average hourly earnings growth slows in August, despite robust labour market
Certainly, for the Fed, these figures confirm that the labour market is far from having adjusted. Nonetheless, the fact that wages are slowing should lead some to hope that the labour market can be adjusted without too much damage. Nonetheless, these figures should encourage the Fed to remain vigilant. Thus, while maintaining a pause in September, the central bank is likely to maintain a tough tone, presuming the need for further key rate hikes.
PMI figures for the manufacturing sector in August confirmed the poor state of the sector worldwide. Nevertheless, the slight rebound in China and a slightly less deteriorated dynamic than in the previous month enabled the global index to recover slightly, even if it remains in contraction territory.
Fig.5 Manufacturing PMI: The overall index remains in contraction territory, but August showed a slight improvement, thanks in particular to China.
Confirming the preliminary figures, the manufacturing PMI for the Eurozone, although improving slightly, remains in sharply contracting territory. While industrial activity in France and Germany remains mediocre, the situation in peripheral countries is also deteriorating, particularly in Spain. This deterioration in activity is surely a factor that the ECB will take into account when making its decisions this month, even if the poor inflation figures for August promise a tense debate within the Governing Council. We are still expecting a pause. The figures on services activity to be published this week should carry even more weight.
In the United States, the ISM manufacturing index rebounded slightly, driven in particular by production, while new orders eased. The only good news is that the ratio of new orders to inventories, often a good indicator of the sector's short-term momentum, has improved again, which could raise hopes of a further slight improvement in production figures. Nevertheless, it is difficult to see a rapid return to growth in such an adverse environment in terms of financing conditions. The ISM services figures to be published on Wednesday will be decisive in determining the state of the economy at the end of the summer, especially after S&P's preliminary services PMIs showed a clear deterioration.