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Manufacturing Jobs Point to Stronger Economic Growth Ahead

Posted by Joseph Trevisani on Sep 1, 2017 1:48:03 PM

American employers hired fewer new workers in August than anticipated but in all other aspects the Employment Situation Report from the Labor Department was on a level with those of the past two years.

Non-farm payrolls added 156,000 jobs, less than the median consensus of 180,000 but the three month moving average rose slightly to 196,000 in August from 190,000 in July.  Revisions to June and July subtracted 41,00o positions.

Hourly wages gained 0.1 percent, half the prediction and annual wages climbed 2.5 percent, missing the 2.6 percent projection but equal to July. The unemployment rate rose 0.1 percent to 4.4 percent, 4.3 percent was the estimate.  Labor force participation was unchanged at 62.9 percent, lingering near the generational low of 62.4 percent.

The service sector, long the driver of employment, faltered in August adding only 95,000  jobs a five-month low but manufacturing jumped 36,000, equaling a five-year high, and construction jobs rose by 28,000, the largest total since February.

Both categories are considered be harbingers of future economic activity. The longer lead times needed to bring their products to market means the employers, manufacturing firms and real estate developers, anticipate improving sales. The second quarter GDP expansion rate of 3 percent and the Atlanta Federal Reserve estimate for the third quarter, revised on Friday to 3.3 percent from 3.4 percent would seem to support the thesis of stronger growth in the second half.

Labor market data over the next several months will likely reflect  Hurricane Harvey's impact on the Gulf Coast and  Texas, one of the strongest regional economies in the U.S.

The storm may reduce payrolls at first, as retail and service sector jobs lose employment days but the clean-up and reconstruction, which will go on far longer, will boost hiring in construction and utilities and many other fields. The Employment Situation Report is based on surveys through the 12th of August. Harvey struck on August 25th.  

 In other report details the U-6 or underemployment rate remained at 8.6 percent for the third month.  This measure includes people who are working part time but want full-time work and all those who have looked for a job in the past year. The standard U-3 rate (4.4 percent) counts part-part time employment and only lists as unemployed people who have looked for work in the prior month. Many economists consider the U-6 rate a better reflection of the labor market.  

Private sector jobs rose by 165,000, following July's 202, 00 advance. Government employment fell 9,000. The average workweek slipped to 34.4 hours from 34.5. 

Joseph Trevisani

Chief Market Strategist


Charts: St Louis Federal Reserve, WWM Alpha Trader

Non-Farm Payrolls

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 U-3 Unemploymentu3 sept 1.png

U-^ Unemployment

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