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How Close Is The Economy To Full Employment?


On its face, news just out from the government about jobs in this country - not good. The Bureau of Labor Statistics says just 142,000 jobs were added to the economy in August. That is far below expectations. But this might not be the final word. The August numbers may well be revised. NPR's John Ydstie explains.

JOHN YDSTIE, BYLINE: During the past six months, the economy has been producing, on average, 244,000 additional jobs each month. So 142,000 is far below the trend. Carl Tannenbaum, chief economist at Northern Trust in Chicago, says today's report conflicts with other economic data.

CARL TANNENBAUM: It does appear out of order with some of the readings that we've had otherwise. The manufacturing surveys are very high. Surveys of hiring intentions are pretty good. And so there's a possibility that this may have some seasonal element to it that, prospectively, might be reversed upon revision.

YDSTIE: The headline job creation number actually gets revised twice by the Bureau of Labor Statistics. In recent months, those revisions have almost always been positive. And August is notorious for large revisions. In the past five years, the initial August reading has been revised upward by 77,000 on average. Part of the issue, says Tannenbaum, is the end of summer vacations, when lots of people, including teachers, come back to work. The BLS tries to avoid an artificial bulge in the monthly job count through seasonal adjustments, but Tannenbaum says it's a tricky business.

TANNENBAUM: The beginning of the school year has a great deal to do with the results for August as there's back-to-school shopping that's timed for the first day of school. To the degree that that floats from one year to the other, it does bedevil some of the statisticians.

YDSTIE: That could be why today's report shows a loss of retail jobs that seems to run against other trends in the economy. Despite the weak job creation number from the BLS survey of businesses, the unemployment rate, which comes from a survey of households, improved. It moved down a 10th of a percent, to 6.1 percent. But Tannenbaum says internal data that Federal Reserve policymakers watch closely, like wage growth, did not strengthen significantly.

TANNENBAUM: This clearly suggests that the labor market still isn't quite at full employment. And there really isn't justification for a near-term change to interest rates.

YDSTIE: So the current view that the Fed is unlikely to hike interest rates until the middle of next year remains intact. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.
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