Three takeaways from mixed August jobs report

Employers added a disappointing 173,000 jobs in August, falling short of expectations. The blow was softened by the equally unexpected drop of the unemployment rate to 5.1 percent.

That’s the best reading on unemployment since March 2008, but there were plenty of mixed signals within the report released Friday by the Bureau of Labor Statistics.

Here are three important takeaways from the jobs report and what it signals ahead for the U.S. economy.

Outlook for U.S. workers improving

Although the headline number on hiring missed, the months of June and July were revised upward by a combined 44,000 after additional data came in. Those were already strong months, so it raises the likelihood that August’s first take might not stand.

“The job market is rocking and rolling,” said Mark Zandi, chief economist for forecaster Moody’s Analytics. “Ignore the weak job gain in August, it will be revised substantially higher in coming months. The economy is generating over 200,000 jobs per month.”

Here’s why Zandi’s upbeat. Full-time employment, as measured in the survey of households, was 122.024 million in August. That’s a record, above the previous peak in November 2007 of 121.875 million.

The two-tenths of a percentage point drop in the unemployment rate is also a good sign. Over the past 12 months, the rate has dropped by a full percentage point to a seven-year low, and 1.5 million people are no longer counted as unemployed.

And wages are creeping up. Average hourly earnings rose at 0.3 percent in August, and have risen 2.2 percent over the past year. That’s higher than the rate of inflation, giving workers a bit more purchasing power.

Global slowdown is being felt

Hiring in August was spread widely across all sectors except manufacturing, which shed 17,000 jobs. That sector faces dual headwinds, turmoil in China and a broader slowdown in the global economy.

China’s devaluation of its currency and Europe’s ongoing debt crisis have made the U.S. dollar stronger against most global currencies, and makes U.S. manufactured products more expensive abroad. It also makes goods manufactured abroad and imported into the United States cheaper.

“Financial concerns in the global equity markets, driven in particular by worries about growth in China … could partly explain the lower manufacturing hiring rates,” said Chad Moutray, chief economist for the National Association of Manufacturers. “There could also be some seasonal factors, given that it was August, a traditionally slower month.”

The unusually low prices of oil and gasoline have been a windfall for U.S. consumers, who now have more to spend. It seems to have helped hiring in the leisure and hospitality sector, which has been solid this year and added another 33,000 jobs in August.

This story was originally published September 4, 2015 at 4:41 PM with the headline "Three takeaways from mixed August jobs report."