Nonfarm Payrolls Add 201K Jobs in August, Unemployment Steady A 3.9%

A heating up in wages headlines another very solid monthly employment report, one that is certain to firm expectations for a rate hike at the month-end FOMC. Average hourly earnings rose an outsized 0.4 percent in August, a monthly jump last matched in December 2017. The year-on-year rate, up 2 tenths to 2.9 percent, was last matched in 2009. Both of these results exceed Econoday's high-end forecasts.

Nonfarm payroll growth came in at 201,000 which is near Econoday's consensus for 195,000. But downward revisions are an offset here, stripping a total of 50,000 from the prior two months.

The industry breakdown shows an unexpected 3,000 decline in manufacturing jobs which is well below Econoday's low estimate and ends a long and very strong run. But construction is very solid, up 23,000 as is mining which, in a strong gain for this industry, rose 6,000.

Other positives include a 37,000 rise in trade & transportation where capacity is expanding and a 53,000 rise in professional services that includes a 10,000 gain for temporary help, both evidence that employers are scrambling to get work done.

Turning to the household survey, the unemployment rate held steady at 3.9 percent though the labor participation rate slipped 2 tenths to 62.7 percent. The number of people in the labor force went down by a half of million, to 161.8 million from 162.3 million reflecting a decrease in the number of employed which in this survey, in contrast to payrolls, includes the self-employed.

Wages popping higher like this and hitting long-term highs will make policy makers at the FOMC impatient. Full employment, or something very near to it, has been in the cards for the past couple of years and has many anticipating an inevitable acceleration in wages -- and with that the risk that overall inflation may overshoot the Fed's 2 percent target.