In a vacuum, the latest numbers on the job market are pretty solid, even good.
Most important, while the overall unemployment rate was unchanged at 3.7 percent for August, there was real improvement in the details underneath that number: A whopping 571,000 more Americans were part of the labor force, and the share of adults who were working rose 0.2 percent.
The Labor Department’s report on Friday showed there was an even stronger rise in the share of prime working-age adults who were working, to 80 percent — up from 79.5 percent in July and the highest level in more than 12 years.
And worker pay rose a strong 0.4 percent, suggesting that employers are having to pay up to attract those workers. Over the last year, average hourly earnings were up 3.2 percent, which is something of a sweet spot: Pay is rising faster than consumer prices are, meaning American workers’ incomes are rising, yet not so fast as to raise alarm bells about inflation at the Federal Reserve.
And while the rate of job creation slowed — employers added only 130,000 jobs (25,000 of those being temporary census hiring), and earlier months were revised downward — those numbers are more consistent with a slowing pace of growth than an imminent recession.
But we are not living in a vacuum. We’re living in a moment when some financial market signals are sending recession warnings and when everyone is on edge, wondering what kind of economic backdrop President Trump will face as he seeks re-election next year.
So against that backdrop, what are the new numbers telling us?
First, the deceleration in the economy is real.
Employers have added an average of 158,000 jobs a month in the last six months, down from 223,000 over the entirety of 2018. On some level this was foreseeable. When the unemployment rate is as low as it is, there simply aren’t as many potential workers out there to fill jobs as there once were. But while the numbers don’t suggest a recession is underway, they also aren’t consistent with rip-roaring growth.
Second, the economic weakness is most pronounced in heavy industry, among workers who make things. Manufacturing employment rose by a mere 3,000 jobs in August, and mining and logging employment fell by 5,000 positions.
This isn’t too surprising. A global economic slump and trade wars are depressing demand for manufactured goods worldwide, and also depressing commodity prices. If the United States economy is going to escape recession, it will be because of the strength of domestic service industries, and they held up reasonably well.
And that is the third point. Many of the sectors that are the biggest employers are chugging along just fine. Professional and business services employment rose by 37,000 positions, health care was up by about the same amount, and leisure and hospitality employers added another 12,000 jobs.
What we’re seeing is a stark divergence between sectors that are intertwined with the global economy and those that are not. It’s evident in other data as well. In August, surveys of purchasing managers by the Institute for Supply Management found that manufacturers were contracting, while service industries were expanding at a healthy pace.
So what kind of economy do we have, 14 months before an election?
Job growth is slowing, as is overall economic growth. Wages are rising steadily but not spectacularly. And all this is taking place at a time when almost everyone who wants a job has one.
But, and it’s an important but, workers in the manufacturing and resource extraction industries, whose livelihoods are most closely linked to what happens abroad, are in considerably rougher shape and are at risk of layoffs or stagnant incomes.
Assuming this pattern continues, it is not some terrible situation. Blockbuster job growth can’t continue forever simply as a matter of arithmetic; you eventually run out of workers.
But it also isn’t the kind of gaudy economic track record a president seeking re-election might like to see.