Hiring Slows: What Happened To Those 50,000 Amazon Jobs?

Job growth appeared to take a step back in August, with the economy adding 156,000 jobs vs. expectations of a 180,000 increase, and the jobless rate ticking up to 4.4%.

So what happened to those 50,000 people Amazon.com (AMZN) supposedly hired at its one-day national job fair on Aug. 2?

Friday's jobs report showed that nonstore retailers added just 700 jobs in August on a seasonally adjusted basis, the weakest month of hiring by the group since September 2016.

The reason why Amazon's one-day hiring binge was a no-show helps explain why August's jobs report is one to forget.

The Labor Department collects its employment data in the week that includes the 12th of the month. Since the 12th fell on a Saturday last month, the survey week began on Sunday, Aug. 6.


The upshot: Not only did those Amazon hires have no time to report to work, but the early-month survey week meant a condensed period for hiring and wage gains. Ian Shepherdson of Pantheon Macroeconomics has noted that average hourly earnings tend to be under-reported when the 15th pay period falls after the survey week.

Average hourly wages rose 2.5% from a year ago vs. expectations of 2.6%. The monthly rise was just 0.1%.

Meanwhile, June and July payroll growth was revised down a net 41,000.

The soft jobs report initially sent Treasury yields sliding toward the lowest level since November, but the 10-year Treasury yield scooted up to 2.16% after a surprisingly strong report on manufacturing activity. Meanwhile, the Dow Jones industrial average saw modest gains to climb back above 22,000, though the Nasdaq composite was barely in positive territory.

The Institute for Supply Management's manufacturing survey index hit a six-year high of 58.8, up from 56.3 in July and far above the neutral 50 level. Economists had expected a slight uptick to 56.6.

IBD'S TAKE: The stock market has been on a roll lately, and IBD readers were prepared. On Aug. 22, IBD shifted its market trend gauge to "confirmed uptrend" from "uptrend under pressure," the equivalent of a flashing yellow light turning green. Read IBD's The Big Picture column each day to stay on top of the market direction, a key indicator that lets you know when you can be aggressive and when you should move to the sidelines.

That factory strength did show up in Friday's jobs report, which showed a 36,000 gain in manufacturing jobs. Overall, the goods producing sector added 70,000 jobs, including 28,000 construction and 6,000 mining jobs.

September's job report will reflect hiring over five weeks, instead of the four weeks reflected in August's report. On top of that, a number of economists have noted a tendency for August payrolls to be revised up substantially in subsequent months.

That's why IHS Markit economists wrote that the Federal Reserve's reaction to August's softer report will be to "discount it fully."

Yet September's jobs report will likely be one to forget too, given the lingering impact of Hurricane Harvey.

Incoming data won't alter the outcome of the Federal Reserve's Sept. 19-20 meeting at which policymakers are widely expected to shift their reinvestment policy and begin gradually scaling back the central bank's $4.5 trillion balance sheet. The change, allowing principal in maturing Treasury and mortgage bonds to run off, rather than reinvesting it, is itself a tightening of policy, so the Fed doesn't want to hike rates at the same time.

The early survey week doesn't explain why the jobless rate ticked up to 4.4%. Yet that figure comes from a survey of 60,000 households that carries a bigger margin of error than the employer survey.

The household survey showed that the number of people with jobs fell by 74,000 in August after jumping by 345,000 in July. Neither monthly change probably reflects reality, so it may take a couple of months to figure out exactly where things stand. Since these data are subject to greater volatility, it doesn't make sense to overreact to them.

The rebound in Treasury yields despite the soft jobs report could show that the bottom is in. The question is whether a pickup in wage growth and further declines in the jobless rate in coming months could begin to alter market expectations that the Fed's next rate hike won't come until June 2018.

Market expectations sharply contrast with Fed members' own June consensus of four more rate hikes through the end of 2018, though the tame inflation data of recent months may well have shifted that consensus in a more dovish direction.

Yet the Fed wants to avoid a situation in which it has to tighten policy more quickly, raising the risk that the economy would stall. In the minutes of the Fed's July meeting, policymakers also upped their assessment of vulnerabilities associated with asset-price levels from "notable" to "elevated."

Ahead of the jobs report, recent evidence has been pointing to upward pressure on wages. On Tuesday, the Paychex-IHS Markit Small Business Employment Watch reported 3% annual wage growth for the first time since the recession.

IBD's own analysis of daily Treasury statements shows that federal income and employment taxes withheld from worker paychecks have been growing at a solid 5.4% annual rate in recent months vs. the 2.0% annual gain in aggregate hours worked. That also suggests wage growth is closer to 3% than recent Labor Department data showing a 2.5% annual gain.

Companies continue to highlight growing wage pressures in earnings calls. A notable recent example came from Carrols Restaurant Group (TAST), the largest franchisee for the Restaurant Brands International (QSR) Burger King chain. In an Aug. 10 conference call, the company said it's seeing 6.8% wage inflation, up from 6% the prior quarter and the 3% to 5% range it anticipated back in November.

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