Financial Review

September Jobs Report

Sinclair Noe — October 7, 2016

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

DOW – 28 = 18,240
SPX – 7 = 2153
NAS – 14 = 5292
10 Y + .01 = 1.74%
OIL – .88 = 49.56
GOLD + 2.40 = 1258.60

The economy added 156,000 new jobs in September. The unemployment rate rose from 4.9% to 5% for the first time since April, though that was largely because 444,000 people entered the labor force, looking for work. Some 3 million people have joined the labor force in the past year.

Before the jobs report, the consensus estimates for about 170,000 new jobs in September. Still, this was the 72nd consecutive month of job gains, which compares to the previous record of 48 months of gains.

The U.S. has added an average of 178,000 jobs a month this year, down from 228,000 in 2015 and 251,000 in 2014.  The economy needs to add a little more than 100,000 jobs a month to keep up with the natural increase in the size of the labor force. So, even a modest increase of 156,000 jobs is enough to take a little slack out of the labor market.

The proportion of Americans in the labor force remains near 40-year lows; but the labor force participation rate increased 0.1% to 62.9%.  That may not seem like a lot, but compared to the same month a year ago, the labor force grew by 1.9%, the largest annual percentage jump since January 2007.

Importantly, the prime-age participation rate (25 to 54 years) was up 0.2% to 81.5%, the highest in nearly three years. Dig deeper and it looks like the labor force is getting younger. For 25 to 29 year olds, there has been a labor force increase of 2.5% over the past year.

The data doesn’t give any insight into why the increase is occurring, but it could be a combination of young people graduating from college or grad school or those who were not able to find work getting a job. For the first time in almost 20 years, we are now seeing a decline in the number of people outside the labor market, which is consistent with periods of full employment. I’m not saying we are at full employment, just that we are getting closer.

There is, of course, another way to look at the jump in the labor force participation rate; there is probably a very large, hidden pool of discouraged workers that still need to be pulled into the labor force. A broader measure of unemployment, the U-6 rate, which includes people who gave up looking for work or can only find part-time jobs was unchanged at 9.7% – representing about 5.9 million people. Meanwhile, just under 2 million people are long-term unemployed – out of work for more than 6 months.

So the increase in the labor force participation rate probably means businesses are now having to attract discouraged workers to re-enter the job market. And one way to attract workers is with higher wages. Hourly pay for the typical worker rose 0.2% in September to $25.79 an hour.

Over the past year hourly wages have climbed 2.6%, almost matching the post-recession high. The 2.6% rise in wages over the last 12 months is better than the 2.3% annual increase in 2015. For more than three and a half years, American workers have seen sustained real wage gains, as hourly earnings have grown faster than inflation.

Since the beginning of the current business cycle in December 2007, real wages have grown at a rate of 0.9% per year, faster than in any other cycle since 1973. Since inflation has been low, real wage growth — the actual buying power of your paycheck — has grown more quickly over this business cycle than in previous ones.

Sustained real wage growth in recent years, combined with continued strength in job creation, has led to increased incomes for middle-class families: last month, the Census Bureau reported that real median household income increased 5.2 percent from 2014 to 2015, the fastest annual growth on record. And while the wage increase for September was slightly below expectations, it still indicates the labor pool is shrinking, forcing employers to raise pay to attract workers.

Another positive is a rise in the workweek, up to 34.4 hours from 34.3 hours with the manufacturing week also slightly higher in what is a positive indication for September industrial production. While hourly wage growth has ticked up some, average weekly hours have been flat, and that means weekly earnings are only growing about 2 percent for the middle-wage group. That’s still beating inflation, which is only up about 1 percent, but this also signals the absence of full employment.

Even though wage gains have been positive, they should not be overstated – they are largely a result of low inflation rather than full employment. If prices pick up before nominal wage growth and hours pick up, any gains in real household income will prove fleeting, at best. We need to keep pulling workers in from the sidelines, and that will require more than weak wages that just barely outpace inflation. Full employment needs accommodative monetary policy from the Fed combined with fiscal policy that invests in training and education for workers, plus investment in infrastructure to support productivity.

One interesting area that might not show up in the Bureau of Labor stats is the number of people who freelance. According to new report on freelancing, there could be as many as 55 million people who don’t have traditional jobs. It is a good bet that not all those jobs are considered in the monthly jobs report. And about half of those freelancers say they don’t really want a “traditional” job.

It is important to keep in mind that freelancing is a very broad term. It can be people with multiple sources of income, or those who are doing temporary or supplemental work. It can be Uber/Lyft drivers, bloggers, editors or professionals who have full-time work but who moonlight on the side. Then there are business owners who are also freelancers.

The younger part of the workforce is much more likely to be freelancing than the older part. Among workers ages 18-24, 47% are freelancing either part-time or full-time, versus 28% of Baby Boomers. Major issues for freelancers include: debt, unpredictable income, being paid a fair rate, and benefits – or lack thereof.

Portable benefits appealed to the freelancers, with 67% saying they would support having access to health and retirement benefits regardless of their employment status. And 68% said freelancers should have the same access to credit as other workers, perhaps reflecting the difficulty even high-earning freelancers have in obtaining a mortgage.

The private sector added 167,000 jobs, while government jobs declined by 11,000. Professional and business services added 67,000 jobs. Education and health services gained 29,000 positions. Hiring by food and drinking establishments rose by 30,000. Retailers hired an additional 22,000 workers.

Construction added 23,000 jobs. Manufacturing lost 13,000 positions. Mining and logging (which includes jobs in the oil patch) showed zero change, which might actually be considered as good news – at least the energy industry wasn’t cutting jobs.

One of the key indicators for employment is education. Unemployment rate for: High school dropouts, 8.5%; High school grads, 5.2%; some college, 4.2%; College degree, 2.5%. According to a new report, “The State of American Jobs,” by the Pew Research Center, employment opportunities increasingly lie in jobs requiring higher-level social or analytical skills, while physical or manual skills are fading in importance.

Social skills are crucial in jobs that require a lot of writing, speaking, managing and negotiating, particularly in educational services and health care and social assistance. Examples of analytical skills are critical thinking, mathematics and computer programming, often found in science, technology, engineering and mathematics or STEM fields.

Overall, the jobs report was “not too hot, and not too cold” and not enough to change expectations for a Federal Reserve interest rate hike in December, although we will be able to look at 2 more jobs reports before the December FOMC meeting. Some senior Fed officials worry that wages could start to rise sharply and feed into inflation unless they act to prevent the economy from overheating.

Still, it looks like there is plenty of slack in the labor market and it seems more likely the expansion will run out of steam before we run out of discouraged workers who might fill an available job. We might have a strange jobs report next month because of Hurricane Matthew. At this time, we just don’t know how that will impact businesses and jobs but it will likely be a negative.

We also have an election to consider. The 5% September unemployment rate is the second lowest in the September before an election in nearly five decades. Since the 1968 election, only the 2000 race featured a lower pre-election jobless rate.

Most people say they are better off today than they were 8 years ago. Of course 8 years ago, the stock market had crashed, the economy was hemorrhaging about 800,000 jobs per month. That does not mean that people have been made whole from the damage suffered in the 2008 financial downturn, and it doesn’t mean that we’ve solved all the problems of the Great Recession.

When people are asked about their personal finances, and whether they are improving or worsening, people are as happy as they have been in many years – and that fits with the jobs report. But Gallup recently asked about “the way things are going” more broadly, and the results are much more negative.

By the way, if you’re wondering how different presidential administrations have performed in terms of jobs, here’s the job creation scorecard: Obama, 10.6 million so far; George W. Bush, 1.3 million; Bill Clinton, 22.9 million; George H.W. Bush, 2.6 million; Ronald Reagan, 16 million; Jimmy Carter, 10.3 million.

Financial Review

Waiting for the Storm

Sinclair Noe — October 6, 2016

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

Subscribe: iTunes | Android | RSS

DOW – 12 = 18,268
SPX + 1 = 2160
NAS – 9 = 5306
10 Y + .03 = 1.74%
OIL + .73 = 50.56
GOLD – 11.30 = 1256.20

The number of people who applied for unemployment benefits fell by 5,000 to 249,000 at the end of September. This marks 83 consecutive weeks of initial claims below 300,000, the longest streak since 1970. Tomorrow the Labor Department reports on how many people found jobs in September; the consensus estimate is calling for about 170,000 new jobs in the last month.

With unemployment near the lowest level since before the last recession, employers are having to offer more incentives to attract skilled workers to blue-collar truck driving and construction jobs.

Tomorrow’s jobs report could provide clues to the timing of the Fed’s next interest rate rise. If the tight jobs market means average hourly earnings rose more than the projected 0.3 percent, the chances of a hike this year could easily increase beyond the current market-implied 61 percent.

Traders are taking the Fed’s November meeting off the table for two reasons: its closeness to the elections could have aggravated political and market consequences, and the Fed may want to avoid raising rates at meetings without scheduled press conferences. There will be two more jobs reports before the Fed’s December meeting. And so, reading the Fed tea leaves based on this report may be premature, unless we get a very dramatic number tomorrow.

Now, when we see the report that weekly claims for jobless benefits are at the lowest levels in 46 years, you might think that is a sure sign that the labor market is very strong. Not necessarily. The labor market is certainly much stronger than it was 5 or 6 years ago, but one reason why claims for unemployment benefits are so low is because fewer people are eligible to make claims, with just over one in four jobless workers (27 percent) receiving unemployment insurance benefits in 2015. Just since 2011, the proportion of jobless workers receiving unemployment insurance plunged from 67% to a measly 27%. From two-thirds to just one in four.

Global outplacement consultancy Challenger, Gray & Christmas reports employers announced plans to cut 44,324 jobs last month; that’s a 38% increase from August, but 25% less than September a year ago.

A fresh report from the Freelancers Union now shows that nearly 55 million Americans are freelancing. If you tally this up against the Labor Department data, it means that 35% of the work force is made up of freelancers. The view is that the number of freelancers is growing and that the freelance economy has added 2 million workers since 2014. The report also shows that these independent workers are “emerging as a powerful economic and political force” and that freelancers contributed $1 trillion dollars to the economy this year.

Consumer loan delinquencies fell to the lowest on record in the second quarter of the year. The American Bankers Association’s index, which tracks late payments in eight categories, fell 3 basis points to 1.35, a record low. Delinquency rates held below the 15-year average of 2.21% for the third year.

Hurricane Matthew, the fiercest Caribbean storm in nearly a decade, slammed into the Bahamas this morning. Haiti now reports more than 100 dead. Now, it is gathering strength and is expected to slam into Florida in the next 4 to 6 hours as a Category 4 hurricane with sustained winds of about 140 miles per hour and a storm surge up to 11 feet. It might even grow into a Category 5.

The National Hurricane Center extended its hurricane warning area farther north into Georgia and more than 12 million US residents are under hurricane watches and warnings. More than 1.5 million Floridians have been told to evacuate.   Efforts to prepare for the deadly storm have resulted in massive gas lines and empty store shelves as residents either get out of town or bulk up on supplies to ride out the storm.

Airlines have cancelled flights from Florida to the Carolinas. Airlines have cancelled more than 3,000 flights. Expect delays everywhere. Twelve U.S. power generators, including two nuclear plants, are in the storm’s path. The risk to Florida’s orange crop is “minimal” because the worst weather will be along the coast.

Evacuations could push storm damage to $10 billion to $15 billion in losses related to economic disruption, and total losses could top out around $50 billion. Shares of publicly-traded property and causality companies are taking it on the chin as Hurricane Matthew bears down on the Florida, Georgia, and South Carolina coasts.

Shares in Twitter fell hard this morning after technology news site Recode reported that Google doesn’t currently plan to make a bid for the company. Recode also said Disney and Apple are unlikely to bid. That leaves Salesforce.com as a possible suitor, although some analysts say an acquisition could hurt Salesforce more than it helps.

Snapchat has begun preparing filings for an initial public offering and is aiming to sell shares in the first quarter of next year. The Wall Street Journal estimates the social media site known for its disappearing texts and photos could fetch a market value of at least $25 billion.

Looking to gain an even more dominant position in retail, Wal-Mart is accelerating its investment in e-commerce. The company is on track to double the number of warehouses dedicated to online sales by the end of 2016 and has installed technology that for the first time puts them on par with Amazon’s robot-staffed facilities.

Wal-Mart tempered its profit forecast for the next two fiscal years due to investments in its online business. Wal-Mart said it expected flat earnings for the year ending on Jan. 31, 2018, with capital expenditures of about $11 billion. It had previously forecast profit growth. New store growth will slow significantly. The retailer expects to build 35 new supercenters in fiscal 2018, down from 69 last year. Even growth of the company’s smaller format Neighborhood Markets will slow, down to 20 new stores in fiscal 2018 from 161 built last year.

Mylan overcharged the government for the EpiPen. The drug company classified the EpiPen allergy treatment as a generic, allowing it to have inflation protections with Medicaid that are not available to branded drugs. Makers of brand-name drugs have to pay higher rebates to states than generics — 23.1% versus 13%. Also, they have to pay additional rebates if their price increases rise more than inflation. So by having EpiPen classified as a generic Mylan saved itself a bunch of money.

Back in 2009, Mylan paid a $124 million fine for misclassifying its drugs and under-paying rebates this way. It is the responsibility of the manufacturer to maintain accurate information of its drug’s status. From 2011 to 2015, government spending on EpiPen increased 463%, from $86 million to $487 million. As of now, the Centers for Medicare & Medicaid Services are unsure exactly how much they were overcharged.

Theranos fired 40% of its workforce. Life sciences company Theranos will close its clinical labs and fire 340 people, founder Elizabeth Holmes said in an open letter. The company said it is no longer focusing on blood-testing after serious questions were raised about the effectiveness of its novel method, but will develop products for outside labs.

One of Deutsche Bank’s problems might have gone away. German financial regulators say they found no evidence to date that the lender violated rules on money laundering in Russia. The stakes are still high for Deutsche Bank as German government officials quietly meet with U.S. regulators in Washington to broker a deal that would reduce the Justice Department’s $14 billion proposed settlement for mortgage backed securities mis-deeds dating back to the financial crisis. Last week, there was a rumor that the DOJ might accept a $5.4 billion fine. With talks ongoing, it looks like the two sides have not come up with a mutually acceptable resolution.

Southwest Airlines Flight 994 was scheduled to depart Louisville for Baltimore yesterday. The flight was cancelled and the plane was evacuated after a passenger’s Samsung smartphone caught fire. And we have all heard the stories of Samsung phones catching fire. The company, which is announced last month that it would replace 2.5 million of the Galaxy Note 7 phones because of a flaw in the battery’s cell that could result in the devices bursting into flames or exploding…, but this phone was a replacement. The passenger sent his old phone in to be replaced with a new battery, and it still caught fire.

The United Nations has organized the first international pact to reduce the airline industry’s carbon emissions. And the airline industry supported the deal. But there’s some fine print. The restrictions won’t even be set for several more years, and emissions will be capped at 2020 levels, and may indeed rise before then, and the standards won’t become mandatory until 2027. And airlines won’t necessarily have to burn less fuel; emissions beyond the 2020 levels could be offset with investments in renewable energy projects and environmental programs. Aviation contributes about 2% of the world’s carbon emissions.

The town of Summit, New Jersey has hired UBER to provide free rides for commuters to and from its train station under a new six-month pilot aimed at solving its downtown parking crisis. Uber is looking at similar arrangements with “another half dozen” towns along the NJ Transit rail line, and that the model could extend to other states in time.

Financial Review

Thursday Jobs Report

Sinclair Noe — July 2, 2015

Podcast: Play in new window | Download (Duration: 13:16 — 6.1MB)

Subscribe: iTunes | Android | RSS

DOW – 27 = 17,730
SPX – 0.64 = 2076
NAS – 3 = 5009
10 YR YLD – .02 = 2.39%
OIL – .03 = 56.93
GOLD – 2.60 = 1166.70
SILV + .13 = 15.78

Normally, we get the jobs report on the first Friday of the month, but the stock and bond markets will be closed tomorrow for the 4^th of  July holiday; so, it’s a Jobs Report Thursday.

The US economy created 223,000 new jobs in June. The unemployment rate dropped from 5.5% to 5.3%; that’s the lowest level in 7 years. Employment gains for May and April were revised lower by a combined 60,000.  Most estimates were calling for 225,000 new jobs last month, so today’s report was right in line. Total employment is now 3.5 million above the previous peak.  Total employment is up 12.2 million from the employment recession low. The economy has produced at least 200,000 jobs in 13 of the last 15 months.  The economy added 2.9 million jobs in the past 12 months.

The participation rate – the percentage of workers in a job or actively seeking a job – dropped three ticks to 62.6%, as 432,000 people dropped out of the labor pool. And this explains why the unemployment rate dropped to 5.3%, because fewer people were looking for work.  Part of the reason may be demographics, as the Boomer generation moves into retirement; so, to get a better indication we can look at the 25-54 age group, which is considered prime years for working – too old for school and too young for retirement; among this age group, the participation rate dropped to 80.8% in June from 81%. This is not a good sign.

The decline in the participation rate is even more disconcerting because June tends to be a month when people move into the labor force; teenagers get summer jobs, recent college grads throw the CVs out on the internet, teachers take work between semesters. In the last decade, an average 1.35 million workers have entered the labor force every June on a not seasonally adjusted basis. This year, the gain was 564,000. That translates into a decline for the seasonally adjusted data, since the monthly increase was much less than it usually is. One theory is that the cold winter weather resulted in snow days, and many students and teachers were still in the classrooms in June. If that is the case, we might see a pop in the July numbers. Or it might be a data glitch, which will be corrected in revisions. Or not. It might just be an indication that there is still way too much slack in the labor force. Unless this trend changes, the shrinkage in the labor force implies that the United States’ economic potential is lower than it would be if there were millions of people ready to jump back into the work force if there were jobs on offer. (And no, I do not know how they count recently announced presidential candidates. Clearly that is a number that could skew results.)

So anyway, the labor force participation rate is at 62.6%, and that is the lowest level since October 1977. It is interesting to look at the changes between the 1977 labor market and today. The biggest difference is in the number of women employed, from 36 million in October 1977 to 54 million now. Male employment has also climbed, but not as much. So as the female labor-force participation rate has climbed, the male rate has dropped, from 80% to 72%. And whereas the male unemployment rate was much lower in 1977, now there’s gender parity. What hasn’t changed is the racial imbalance. The black unemployment rate is about double the white unemployment rate, then and now. The other big change is that in 1977 there were more people working in manufacturing, more than 19 million compared to a little more than 12 million today. Construction is up, a bit; transportation and public utilities have grown the most by percentage. But the big difference is in the service sector, which has exploded from around 15.5 million in October 1977 to almost 62.5 million today.

And that isn’t the only way the labor market has changed in the past 38 years; work has become untethered from the office thanks to the technological revolution; that has led to an explosion in freelance or a more flexible workforce.  Imprecise terms like “temp,” “contingent,” and even “freelance” fail to reveal the shift taking place; there is a new category of “on demand” workers. The rise of the on-demand workforce encompasses far more than Lyft, its rival Uber, or similar start-ups like Airbnb, for overnight stays, that allow for new “sharing” sources of income. And it’s hardly a millennial phenomenon, although younger workers do have the highest rates of “freelance” work, and generally hope to keep it that way. It’s possible that “work” is also coming in multiple forms, from multiple sources.

Of self-described freelance workers, 27% have a traditional job and “moonlight,” and another 18% do a mix of full-time and freelance work, whether by choice or necessity. The classification of people as either employees or independent contractors for legal purposes is also not keeping up with reality. And here’s a shocker, the governmental agencies assigned with tracking this workforce, haven’t kept up. The Labor Department’s “Contingent Work Supplement” was designed to track some of the indicators, but they ran out of money in 2005. So, the reality is we just don’t know.

The number of people working part-time for economic reasons decreased from 6.6 million in May to 6.5 million in June. An alternate measure of unemployment known as U-6, which includes underutilized workers, dropped to 10.5%, the lowest level since July 2008.

Most industries added jobs in June, with the notable exception again of energy producers; the mining and logging sector, which includes jobs in the oil fields, lost 3,000 jobs last month; the unemployment rate in the mining and gas industry now hovers around 8.9% – a sharp increase from 2.5% one year ago. White-collar workers in fields like finance, insurance, software and marketing have been in high demand lately, a turnaround from the early days of the recovery when many new jobs tended to be in low-wage sectors like retailing and restaurants. Professional and business services added 64,000 jobs last month; since last summer, for example, the financial sector has added more than 100,000 new positions; the banking and finance industry now boasts the lowest unemployment rate, 2.5%, of any industry tracked by the Bureau of Labor Statistics.

Taking a look at other industries: education and health services added 50,000 jobs, retail added 33,000, leisure and hospitality gained 22,000, financial activities 20,000, transportation gained 17,000, information added 7,000, and manufacturing added 4,000. Utilities lost a few hundred jobs and mining down 3,000. Government jobs both at the federal level and the state and local level were flat.

Retailers hired 33,000 people in June after taking on 26,000 new workers in May. Over the past year the industry has filled some 300,000 positions to boost overall employment to a record 15.7 million. Retailers are hiring like they expect sales to pick up, even though we haven’t seen an indication that sales are actually picking up. And that goes in line with another economic report this morning showing orders for goods produced in U.S. factories fell 1% in May. Orders for durable goods, products meant to last at least three years, fell 2.2%, compared with a prior estimate of a 1.8% drop. Meanwhile, orders for nondurable goods increased 0.2%. Last week the Commerce Department reported consumer purchases rose 0.9 percent in May, the biggest gain since August 2009

Average hourly earnings for all employees on private nonfarm payrolls were unchanged at $24.95. Weekly hours were unchanged for the fourth month in a row, at 34.5. Over the year, average hourly earnings have risen by 2.0 percent. Any increase is good, but the pace is discouraging because it’s still far below the 3% to 4% wage gains that were common in the mid- to late-1990s.Every month for the past 3 years the economy has added at least 100,000 new jobs, but wage growth shows no pulse, no signs of life. This would suggest that the unemployment rate could go much lower before we need to worry about wage push inflation.

So, the economy added 223,000 jobs but there was weakness in the participation rate, and wages, and the prior 2 months were revised lower. And that means nothing in today’s jobs report is expected to dramatically change the Federal Reserve’s outlook for the economy or a possible rate hike in September. Still, traders who use fed funds futures contracts cut their expectations of a September move down to 17% and even lowered their expectations of a move by December a bit. The Fed has four policy meetings left this year: July, September, October and December. If you think the Fed will hike rates in September, today’s report probably did not change your outlook. If you think the Fed will wait till December or maybe next year, again, no need to rewrite your thesis.

The Fed seems to think full employment is when the unemployment rate hits about 5% to 5.2%; that’s the most jobs we can have while keeping the inflation genie in the bottle. But when you look at the shrinking participation rate, and weak wages, and underutilized workers, and temps, and part-timers – maybe 4% unemployment rate is closer to full employment. Nobody knows how low unemployment can go before inflation picks up. Everybody, including the Fed, is just guessing. The only thing we do know is that we’re not there now. And that’s why there’s a strong case for the Fed to wait.

Today’s report: 223,000 new jobs in June. The unemployment rate 5.3%. Flat wages, declining participation. Decent, not great.

Everything You Need to Know About the Jobs Report

Financial Review with Sinclair Noe 09-05-2014

Podcast: Play in new window | Download (Duration: 13:15 — 6.1MB)

DOW + 67 = 17,137
SPX + 10 = 2007.71 (record)
NAS + 20 = 4582
10 YR YLD + .01 = 2.46%
OIL – 1.00 = 93.45
GOLD + 7.50 = 1269.40
SILV + .13 = 19.29

The S&P 500 index closed at a record high; the Dow Industrials closed just short of a record high. The S&P 500 and the Dow recorded their fifth consecutive weekly gains. For the week, the Dow and the S&P each gained 0.2% and the Nasdaq rose 0.06%.

Today is a jobs report Friday. In August, the economy added 142,000 net new jobs and the unemployment rate dropped to 6.1%. This was a weaker than expected report.

The economy had been averaging more than 200,000 new jobs a month for the past 6 months. Economists expected somewhere around 220,000 to 230,000 new jobs.

Employment gains for July and June were lowered by a combined 28,000; June was revised from 298,000 to 267,000, and the change for July was revised from 209,000 to 212,000. The August report will likely be revised as well. Each job report starts with an initial estimate on the first Friday of the month, followed by two revisions. The month of August is prone to sharp revisions; over the past 5 years, the difference between the first and third estimates have averaged more than 70,000 per month; and each of the past 5 August revisions were higher, but revisions can go either way.

Last month, the economy added 212,000 jobs and the unemployment rate went from 6.1% to 6.2%. This month the economy added 142,000 jobs and the unemployment rate dropped back down to 6.1%, matching a six year low; but in this case, a lower unemployment rate is not good, it means more people stopped looking for work. The Labor Force Participation Rate decreased in August to 62.8% from 62.9% in July. This is the percentage of the working age population in the labor force. Labor force participation is now at a 36 year low.

The population can be divided into three categories: Working, looking, outside the labor force. The share of adults who are working fell sharply during the Great Recession and has recovered only slightly. The category of those looking, which is what the unemployment rate measures, has fallen steadily, but mostly because people stopped looking, not because they started working. The question then is how many people may start looking for work again? It is possible that the economy could improve, more people could look for jobs and actually get jobs, only to see the unemployment rate move higher. Last month, Federal Reserve Chair Janet Yellen said, “the decline in the unemployment rate over this period somewhat overstates the improvement in overall labor market conditions.”

Part of the decline in labor force participation is demographics, as the population ages, more people move to retirement, whether they want to or not. There might be some small amount attributable to workers returning to school. So, for better focus we can look at the participation rate for people age 25 to 54, the prime working years; for this group, the participation rate increased in August from 80.8% to 81.1%.

Employment is now up 2.48 million year-over-year. Total employment is now 753 thousand above the pre-recession peak. Total employment is up 9.46 million from the lows of the recession in March 2010. Employers outside the government have added jobs for 54 straight months–the longest such streak on records back to 1939. However, the average number of jobs added each month of the recovery remains weak by historical standards. In the first 8 months of this year, the economy has added 1.72 million jobs, or an average of about 215,000 per month. At the current pace, the economy will add 2.58 million jobs this year, with 2.52 million of those jobs coming from the private sector; that means 2014 could be the best year for job growth since 1999.

There are about 7.3 million people working part-time for economic reasons; that’s down slightly from 7.5 million in July. These workers are included in an alternate measure of unemployment known as the U-6, which includes unemployed and underutilized workers; U-6 dropped from 12.2% to 12.0%, the lowest level since October 2008.

There is a strange gap in the U-6 rate, and that is freelance workers. A new survey from the Freelance Union shows there are about 53 million people, or 34% of the workforce, that freelance. In 2006, the Government Accountability Office (GAO) put the number of freelancers at 42 million, though it’d be difficult to make a direct comparison between the two figures because of differences in methodology. The survey finds freelancers include 21 million independent contractors, 14 million moonlighters, 9 million who combine traditional work with freelance, 5.5 million temporary workers, and 2.8 freelance business owners; although I’m not sure temp workers always consider themselves freelancers.

The survey paints a generally sunny picture of what it’s like to be a freelancer, with 77% reporting that they make as much, if not more, than they did with a steady job. More than 40% said they even expected to make more in this coming year.

There are still more than 2.9 million workers who have been unemployed more than half a year; that’s down from more than 3.1 million in July. This number has been trending lower but in a healthier economic environment we might expect the number to be between 1 and 2 million. It is estimated that there were 4.7 million job openings in June, the most since 2001, but employers are taking longer to fill those vacancies; it’s taking 25 working days on average to fill vacancies, a 13-year high, and for companies with 5,000 employees or more, it’s taking more than twice that long, or about 58 working days.

So, there is still plenty of slack in the labor market and that is reflected in wages. Average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents in August to $24.53; that followed no change in July. The workweek was 34.5 hours for the sixth month in a row. Over the year, average hourly earnings have risen by 2.1%. Low wage industries account for 44% of employment growth over the past four years but only 22% of job losses during the recession. Which is another way of saying good paying jobs have been replaced with bad paying jobs. The economy can’t grow much unless wages rise substantially.

Productivity since the mid-1960s has more than doubled while wages overall are essentially flat. Firms have been able to squeeze more profit and more revenue out of their employees. If companies continue to see that they can increase revenues and profits efficiently using their current work force, the incentive to hire may be less evident, as each new hire represents an additional overhead cost. So, I guess the message is that if you want to see more people get more jobs, you need to take a longer break for lunch.

In August 2014, private payrolls added 134,000 jobs; state and local governments added 5,000 jobs. State and local government employment is now up 123,000 from the bottom, but still 621,000 below the peak. And federal government employment is still down 19,000 for the year.

The best industry for job seekers in August was in professional and business services, which added 47,000 jobs. The top area for hiring within the industry was management of companies and enterprises. Other areas of strength included administrative and support services, architectural and engineering services and in management and technical consulting services.

The health care sector was a standout, adding nearly 43,000 positions. Bars and restaurants hired more workers once again last month. Employment in food services and drinking places rose by 21,500 in August. Construction employment also improved last month, as payrolls expanded by 20,000. Areas of strength included specialty trade contractors and construction of buildings.

On the other side of the August jobs report, there were pockets of labor-market weakness in several major industry subsectors. The factory sector, which added more than 50,000 positions in May, June and July, was unchanged in August. Retail employment shrank by 8,400 last month, following a gain of 85,000 jobs in the prior three months. Some of the moves may be temporary; thousands of employees at a supermarket chain in New England called Market Basket had their hours cut or they walked off the job to protest the firing of a well-liked chief executive. Auto makers laid off fewer workers in July, so they recalled fewer employees than usual in August.

If you have at least a bachelor’s degree, the unemployment rate is 3.2%, compared with 9.1% for high-school dropouts. And workers with four-year college degrees made 98% more an hour on average in 2013 than people without a degree. That’s up from 89% five years earlier, 85% a decade earlier and 64% in the early 1980s. It would seem the American workforce has never been better educated despite claims of a skills gap; the number of people with 4 or more years of college outweighs those who have only a high school degree, 63.3 million to 62.1 million.

A report from the New York Fed finds more and more college graduates have been finding work but that they are often underemployed. The unemployment rate for recent college graduates is around 5%, which is higher than historical standards, but the report finds nearly half of all recent grads are in positions that don’t necessarily require college degrees; most of the jobs offer decent wages, only 15% are working in low wage jobs.

So, today’s jobs report was not good. Maybe the revisions will make it better. For investors, it was not a bad report. Nothing in the numbers would give the Federal Reserve reason to raise interest rates sooner rather than later. The Fed will raise rates; that is a very, very high probability move. Today’s weak number was just one month, and one month does not reverse a trend, rather it reinforces the slow steady progress.