Economy Sheds 4,000 Jobs in August

September 11, 2007--The labor markets shed 4,000 jobs in August as the unemployment rate held steady at 4.6%. Concurrently, the ISM index decreased but remained in expansionary territory. In the 2^nd quarter, nonfarm business productivity increased 2.6% while unit labor costs inched up 1.4%. Last, wholesale inventories increased 0.2% in July as sales grew 0.1%.
 
Employment Situation
In a surprising report, the labor market shed 4,000 jobs in August, the first monthly overall decline since August 2003. The decrease was caused by the goods-producing industry, which dropped 64,000 jobs from the payroll. The government also cut 28,000 jobs. Average hourly earnings increased from $17.45 to $17.50, a 0.29% uptick. Last, the unemployment rate held steady for the month at 4.6%.
 
ISM Index
For the second consecutive month, the ISM index inched down, decreasing 0.9 points in August to 52.9. Manufacturing activity, however, is still in expansionary territory (above 50). New orders fell slightly but production and new export orders both inched upward. On the inflation front, "prices paid" fell to 63.0 and has steadily decreased from its high of 73.0 in April. This month's report will provide ammunition to proponents of a Fed rate cut.

 

Productivity and Costs
Nonfarm business productivity increased 2.6% (SAAR) in the 2^nd quarter, an acceleration from the 0.7% rise during the 1^st quarter. On a year-ago basis, productivity has increased 0.9%. There was good news on the inflation front, as unit labor costs grew 1.4%, a welcome slowdown from the 5.2% surge during the 1^st quarter. However, on a year-ago basis, unit labor costs are up 4.9%, its largest year-over-year increase since 2000.

 

Wholesale Trade
Wholesale inventories increased 0.2% in July while sales inched up 0.1%. Inventories for durable goods fell 0.5% as durable goods sales were unchanged. Concurrently, nondurable goods inventories increased a strong 1.5% while sales edged up 0.1%. Last, the I/S ratio, which measures how many months it would require to deplete current inventories at the existing pace of sales, remained at 1.11.