What to make of the unemployment data: unemployment rate rises to 9.6%, no wait, companies are hiring, but the government is laying off census workers

Nonfarm payrolls fell 54,000 in August as temporary Census workers declined 114,000. Private payrolls increased 67,000 in August, which was above expectations. Also, private payrolls in the prior two months were upwardly revised by 66,000.

The unemployment rate rose to 9.6% in August from 9.5% in July, however, this came as labor force participation rose to 64.7% from 64.6%. Household employment rose 290,000 in August.


The intelligencia have no idea what to make of this data.  On one hand the unemployment rate increased.  One the other hand, private payrolls see an increase in hiring. 

To show the split personality that is the media, have a look at a sample of the headlines.  They have no idea what to make of the news

Washington Post: Unemployment rate rises, in sign of weak growth
Romer: Unemployment data shows recovery continues
WSJ:  Jobs report: Stronger than Expected, Yes; Strong No
NY Daily News: Unemployment rate rises to 9.6%, first increase in four months as economy struggles

The higher-than-expected increase in private payrolls, combined with a net 66,000 upward revision to private payroll growth in June and July (the total payroll revision was +123,000), does not support the view that the economy is sliding into a double-dip recession. Taken with the manufacturing ISM report, it appears that the performance of the U.S. economy in August is outperforming expectations and we think it unlikely that the Fed will expand its QE program at its September 21st meeting.

Looking to other releases for August, this report points to a fairly solid gain in manufactured output in the industrial production report since factory hours increased 0.1% (despite the 27,000 decline in manufacturing employment, which, given the strength of the ISM employment index looks suspicious to us—the job losses were concentrated in motor vehicles and parts and thus may be related to the changed seasonal pattern of auto shutdowns this Summer) and a moderate increase in labor incomes in the personal income report given the 0.3% gain in average hourly earnings. Our best guess is that the Summer slowdown in growth is beginning to fade and we still expect growth to average close to 3% in the second half of the year.


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