The U.S. Nonfarm Payrolls data released last Friday indicated continued recovery in the job market in August. 1.37 million jobs were added while unemployment rate fell from 10.2% to 8.4%, a decline that was way lower than the forecasted figure and was also the first time whereby unemployment rate drops below 10% ever since the COVID-19 pandemic started. Average hourly earnings on a monthly basis doubled from July’s revised figure to 0.4%. As a result, the U.S. dollar strengthened against the other major currencies.
However, the strength of the U.S. dollar was short-lived. Looking close into the data, we see that the rate at which jobs are being added has slowed down. Also, out of the 1.37 million jobs being added in August, 238,000 were temporary Census workers who will soon be out of job by the end of September when their contract is over. Furthermore, the number of jobs recovered thus far is still less than half of the amount lost during the pandemic.
The decline in unemployment seems too good to be true. Under the U.S. Bureau of Labor Statistics, in order to be considered unemployed, one has to be without jobs and is actively looking and available to work. However, many people who are jobless are motivated to not look for a job, thus contributing to a lower level of unemployment. This is because those people are living off the unemployment benefits that can be claimed without having to be looking for a job.
Despite the increase in average hourly earnings, the U.S. Bureau of Labor Statistics indicated in the jobs report that the large employment fluctuations (especially in industries with lower-paid workers) over the past few months have complicated the analysis of recent trends in average hourly earnings, making the data less constructive. With the release of this jobs report, it is unsure if it will in any way affect the negotiation of further unemployment benefits between the Democratic and the Republican parties. But one thing we know for sure is that jobs recovery still has a long way to go.
(This article was originally published on Samtrade Academy on 9 September 2020)