skip navigation

By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

August Payroll Gains Disappoint

Private-sector payrolls disappointed in August, adding 126,000 alongside a downward revision of 13,000 to July data. The core jobs measure we track, excluding retailing and construction, rose by 117,000, with July’s number unrevised. The August data resumed a year-long trend of slower growth, following stronger prints in June and July.

The accompanying chart tells the story. No, job growth is not imploding, but there has been a clear deceleration in growth this year, reflecting the even sharper deceleration in GDP growth (from 2.0% to 2.5% over 2011 through early-2015 to 1.2% in the last year). The cause of both these decelerations is clear: a major slowdown in the US factory sector. Goods-sector GDP grew a scant 0.5% in the past year, compared with a 4% growth trend over 2012–2014. Similarly, the slower job growth this year is entirely due to declines in manufacturing jobs, as well as in the industries upstream and downstream from manufacturing: mining and logistics.

In line with these trends, factory payrolls resumed their downtrend in August, with factory production jobs down 13,000 in August. In addition, a -12,000 revision to July factory production jobs erased the previously announced gain for that month and more than offset the 8,000 gain in June that remains in the data.

Many analysts had been proclaiming a rebound in manufacturing, based on the June/July data. We were skeptical of this, given that the main drivers of factory weakness, capital spending and exports, had not shown any improvement that would presage a production upturn. Today’s data confirm this skepticism, with the downtrend in factory production jobs now firmly entrenched and similar developments likely with respect to factory output within the industrial production data. (Factory workweeks also declined substantially within today’s release.)

Our growth forecast has been well below the consensus and consequently, we have been expecting fewer Fed rate hikes than the Fed’s rhetoric would suggest. Today’s news is consistent with this expectation.

Private-Sector Job Growth
Private-Sector Job Growth
Source: Bureau of Labor Statistics. As of 31 Aug 16

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 43 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

Sign up to receive email updates as new reports are released.

© Western Asset Management Company, LLC 2020. This publication is the property of Western Asset and is intended for the sole use of its clients, consultants, and other intended recipients. It should not be forwarded to any other person. Contents herein should be treated as confidential and proprietary information. This material may not be reproduced or used in any form or medium without express written permission.
Past results are not indicative of future investment results. This publication is for informational purposes only and reflects the current opinions of Western Asset. Information contained herein is believed to be accurate, but cannot be guaranteed. Opinions represented are not intended as an offer or solicitation with respect to the purchase or sale of any security and are subject to change without notice. Statements in this material should not be considered investment advice. Employees and/or clients of Western Asset may have a position in the securities mentioned. This publication has been prepared without taking into account your objectives, financial situation or needs. Before acting on this information, you should consider its appropriateness having regard to your objectives, financial situation or needs. It is your responsibility to be aware of and observe the applicable laws and regulations of your country of residence.
Western Asset Management Company Distribuidora de Títulos e Valores Mobiliários Limitada is authorised and regulated by Comissão de Valores Mobiliários and Banco Central do Brasil. Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services Licence 303160. Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services Licence for fund management and regulated by the Monetary Authority of Singapore. Western Asset Management Company Ltd is a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan. Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority (“FCA”). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK and EEA countries as defined by the FCA or MiFID II rules.