Labor market growth slowed slightly in August, but the U.S. economy still managed to drum up a respectable 177,000 new job opportunities despite continued sluggishness from American goods producers.
The latest ADP National Employment Report on Wednesday showed employment growth cool from July’s four-month high of 194,000 additions. But August’s gains are only slightly below the monthly 184,000-addition average the economy has maintained so far in 2016, according to ADP’s database.
Large businesses with at least 500 employees led gains and accounted for a whopping 70,000 new jobs, up considerably from July’s 56,000 additions. Small businesses with less than 50 employees generated 63,000 new positions, which was just shy of last month’s 68,000-addition watermark.
“Job growth in August was stable and consistent with levels from previous months as consumer conditions improve,” Ahu Yildirmaz, vice president and head of the ADP Research Institute, said in a statement accompanying the report. “Continued strong growth in service-providing jobs is offset by weakness in goods-producing areas.”
Indeed, America’s service-providing employers actually created 183,000 new jobs this month, while goods-providing outfits shed 6,000 positions. Professional and business services continued to lead the way with 53,000 additions, while trade, transportation and utilities companies accounted for 26,000 new jobs.
Construction operations, meanwhile, shed 2,000 jobs this month, and manufacturing employment stalled out with no improvement in August – though that’s still a step up from the periodic losses the sector has seen so far this year.
There’s been little room for optimism among goods producers in recent months. Such outfits haven’t seen much success in recent months in either the ADP reports or the Bureau of Labor Statistics’ official employment numbers, which typically come out a few days after ADP’s and draw from a different pool of data.
And alternative data points and reports have been anything but sunny. Home construction has been disappointing in recent months as inventories remain tight, which doesn’t help out many construction workers on the sidelines who are looking for a job.
And manufacturing economic activity was said to have declined in several recent regional Federal Reserve bank analyses, including those from Richmond and Kansas City. In a report from Dallas, which actually showed an uptick in business activity but profiled a region with a “fairly pessimistic” outlook and “slight employment declines and shorter workweek length,” an anonymous industry respondent to the survey of professionals indicated that “historical data will show that in 2016 the U.S. was in recession.”
Quarterly gross domestic product data can still be revised, but at least in the first half of the year, the U.S. slogged through underwhelming economic growth but growth nonetheless. U.S. GDP ticked up a modest 1.1 percent in the second quarter following a 0.8 percent expansion in the first three months of the year.
While that pace is undoubtedly disappointing, the labor market appears to have managed to chug right along without being meaningfully impacted. Analysts widely believe the country is closing in on full employment and that monthly job growth will eventually slow as the labor market hits capacity. But at least for the time being, 177,000 new jobs is a respectable pace and keeps the Fed on track for a potential rate hike at its September meeting in Washington.
Wednesday’s ADP report wasn’t going to be the straw that broke the camel’s back on a rate hike one way or the other, but data points like these are generally what the Fed want to see – consistent, stable expansion in an already strong labor market.