WASHINGTON (MarketWatch) — The U.S. economy grew 3% in the spring to mark the fastest spurt of growth in more than two years — and strong job creation is one of the biggest drivers.
Economists polled by MarketWatch expect another steady gain in hiring in August: They predict 170,000 jobs were added last month. The unemployment rate is likely to stick to a 16-year low.
Here’s what to watch in the August employment report due Friday at 8:30 a.m. Eastern.
Take the preliminary August employment numbers with a grain of salt. So many people are on vacation in late summer tends that response rates to the government’s questionnaire are low.
Consider: The initial August jobs report has undercounted actual hiring by an average of 50,400 in the past 10 years, noted senior economist Sam Bullard of Wells Fargo Advisors. The hiring numbers tend to improve as more survey participants turn in their forms and the government updates its tally.
Hurricane Harvey won’t have any effect on the August employment report. The government compiled its estimate before the storm devastated Houston.
The jobless rate has fallen faster and further than virtually anyone would have expected a few years ago, matching a 16-year low of 4.3% in July. Unemployment is likely to remain at 4.3% in August, but it’s widely expected to drop below 4% in the near future.
Also Read: This economist sees potential for 1 million jobs lost to Harvey
A broader measure of unemployment known as the U-6 rate is still a touch elevated compared to pre-recession levels. The rate stood at 8.6% in July vs. 7.9% a year before the onset of the 2007-2009 downturn.
The U-6 includes people who can only find part-time jobs and those who stopped looking for work after getting discouraged. The good news is, more of them are likely to find jobs soon with openings near a record high.
Worker pay hiatus
A tight labor market typically forces firms to raise wages to attract workers. The process appeared well under way as hourly pay rose to a 2.9% annual rate at the end of 2016 from less than 2% two years earlier. In the best of times wages usually rise 3% to 4% a year.
Yet wage growth has mysteriously tapered off to a 2.5% yearly rate, generating lots of debate as to why. Companies appear to be finding fresh and innovative ways to keep wages in check, but how long they can continue to do that with unemployment so low is unclear.
Also Read: Six reasons why most Americans aren’t getting big pay raises
What goes up …
Employment gains in some industries such as health care and food service have been usually strong lately, suggesting a pullback is due. If so, overall U.S. hiring could prove to be weaker in the back end of 2017 after a surprisingly strong first half of the year.
So far the economy has added an average of 184,000 a month in 2017, nearly matching the gains in 2016. Economists have long been predicting a slower pace of hiring, and job growth is bound to slow soon with the labor market so tight.
- Tesla Model 3 killer? Nissan to launch redesigned Leaf
- Seven iPhone Tricks to Save You Time
- Dow faces an important change to how it’s calculated