Following two months of impressive gains, the employment report released a week ago by the Bureau of Labor Statistics was rather unremarkable. According the the establishment survey, private payrolls added only 126,000 jobs in August, while government employment rose by 25,000 to bring the total job gains to 151,000. According to the household survey, the employment level rose by 97,000. These figures are just enough to keep pace with the growth in population. So unemployment held steady at 4.9% for the third month in a row – a figure held artificially low by the “vanishing work force” trick used throughout the Obama administration. Otherwise, the figure would be 8.0%.
It wasn’t a bad report, but there are some causes for concern:
- The average work week fell by 0.1 hours. For manufacturing workers, it fell by 0.2 hours.
- Average hourly earnings rose by only 3 cents. That’s an annual rate of gain of just over 1%. It had been running at 2.4%. It lagged the rate of inflation in August, meaning that American workers grew slightly poorer.
- Hiring gains were led by restaurants and bars, a segment of the economy that may be built to over-capacity and is ripe for some contraction, especially as the economy begins to slow.
- Manufacturing employment was flat again and is down by 37,000 compared to a year earlier.
- Health care employment rose by only 14,000 – well below the average monthly gain of 39,000 for the prior twelve months.
That last item could be an early indication that the economic boost from Obamacare has just about run its course. Obama has avoided the economic funk that typically plagues administrations as they near their end. Typically, an administration begins to rein in the deficit spending that was driven by stimulus programs enacted early on, as pressure builds to cut the deficit. But “Obamacare” was a whopper of a stimulus program, continuing to pour trillions of dollars into the economy. But the process of scaling up the health care industry to meet the new demand fueled by that program may now be nearly complete. We’ve even heard of insurers exiting the program, citing unexpected losses.
So far this year, job gains have averaged 181,000 per month, down from 229,000 in 2015, which was down from 251,000 in 2014. August gains lagged the average for 2016. The labor market is clearly slowing. Obama’s adminstration may catch the late-term economic flu yet.