What to watch in the August jobs report

The Labor Department releases the August employment report Friday morning at 8:30 EDT. Among the headline-grabbing numbers being watched, economists generally see the jobless rate remaining at 4.3 percent with fewer than 200,000 jobs added to payrolls.

Beneath the surface, here are some things to watch in this most important monthly gauge of the U.S. economy.

-Job market is still improving: For the bulk of the past decade, the U.S. job market has been on the mend. The economic expansion, which began in June 2009, shows no sign of exhaustion. Indeed, through the first seven months of 2017, employers have added more than 200-thousand jobs in five of those months. That’s twice as many jobs as needed to keep pace with growth in the population, helping whittle away remaining slack in the job market.

-How low can it go? Unemployment went down to 4.3 percent in July and there are reasons to think that as long as the economy is healthy, the rate can still go lower in the coming months. By most measures, there’s still some slack in the job market. The Labor Department says 7 million Americans remain out-of-work with nearly 2 million jobless for 6 months or longer. More than 5 million people who have been working part-time would like full-time work.

-What’s the longer-term outlook? Our latest Bankrate quarterly economist survey looks for further improvement for the U.S. economy over the coming year with the unemployment rate slipping to 4.2 percent. Also, the average among our economist respondents is for monthly jobs creation of 168,000, still well above the number needed for the job market to remain steady, or absorb growth in the population.

-Sustained growth is fine, not fantastic: Now two-thirds of the way through 2017, expectations are that we’ll see firm growth continuing in the soon-to-be completed third quarter. That’s barring the truly unforeseen. Growth was a solid (seasonally adjusted annual rate of) revised 3% in the April-through-June quarter. The Atlanta Fed’s GDPNow forecast recently puts Q3 growth at 3.4%, which might be on the ambitious side. The devastation caused by Hurricane Harvey will take a bite out of growth in the current quarter, but the exact impact is hard to measure just yet.

-Dude: Where’s my pay raise? The issue of pay raises is at the heart of the most persistent complaint about the state of the job market. Through July, average hourly earnings were up an-all-too-familiar 2.5% over the past year. Interestingly, a new, first-of-its-kind survey of workers just released by the Federal Reserve Bank of New York found a decline in the average full-time wage being offered from March through July. Workers’ expectations on wages also declined.

-Federal Reserve wonders: Where’s inflation? With wage growth apparently restrained even as the job market firms, the Federal Reserve continues to wonder aloud “Is this time different?” The mystery with the lack of more substantial inflation complicates the central bank’s desire to normalize monetary policy, or in other words, boost benchmark interest rates further. One “wrinkle” here involves retirement of baby boomers. As they exit the work force, employers are able to substitute lower-paid younger workers whose health care is also less expensive.

-No legislation so far, no “Trump bump”: In Washington, health care legislation is dead. Tax reform is questionable and infrastructure funding also isn’t a sure thing. The president’s pledge to significantly boost growth, as of now, appears to be a largely empty promise. As time marches on and we get closer to the 2018 mid-term elections, the less inclined Congress is to agree on anything. We’ll see whether catastrophic flooding in Houston and elsewhere in Texas and Louisiana compels lawmakers to focus on the best interests of the nation, not on the exclusive interests of respective political parties. One can always hope.

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