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By Jason Stipp and Robert Johnson, CFA | 09-07-2012 09:00 AM

August Job Report Doesn't Quite Add Up

Although the employment market is anything but robust, it's also not likely as weak as the government data would suggest, says Morningstar's Bob Johnson.

Note: Vishnu Lekraj, who normally joins our employment reports, is away from the office this week.

Jason Stipp: I'm Jason Stipp for Morningstar.

We got the government’s employment report for August on Friday. It was a disappointing one. Only 96,000 jobs were added to the economy. The unemployment rate did tick down to 8.1%. We’ll dig in to some of that.

Joining me to offer the details on the report and his take is Morningstar’s Bob Johnson, our director of economic analysis.

Thanks for joining me, Bob.

Bob Johnson: Thanks for having me.

Stipp: So, the number was a disappointing; it was lower than the economists expected, lower than what you were hoping for at 96,000. What’s your take on that number, and then how does it stack up to the longer-term range that you look at?

Johnson: The 96,000 was clearly a disappointing number. We had a better number the previous month, more like 160,000 private-sector jobs. So, it was a disappointing number, but there were a lot of special factors in there. And again, I caution, I like to look at the numbers on a year-over-year basis more than the jumps we have in individual months. And we’re still at the 1.8% year-over-year growth rate in employment, which is an OK level. I wish it were an awful lot higher than it was, but when you take some of the jumpiness out of it, it's kind in range, if you will.

Stipp: So, not robust, but in a relatively stable range. They did revise lower a couple of the months before August. Is that a concern or is that just an adjustment you’d expect to see?

Johnson: No, it’s always problematic. I think it means the latest data is a little bit worse, so you hate to see those downward revisions. So, that was I think one of the more disappointing aspects of the report to me was that some of the earlier months were brought back down. But when you still ran all the math, you still had the 1.8% growth in each of the last three or four months in the employment report, which is the absolute key number that I'm watching. And as long as it stays above the 1.5% range, I'm not particularly fearful. Now we'll have to have a decent month in September to keep it in that range.

Stipp: And again, that 1.8% is the year-over-year growth that you're looking at?

Johnson: Yes.

Stipp: Okay. So, one of the other reasons that this report was so disappointing is that we got a pretty good report from ADP with 200,000 private-sector jobs added, and I think that got our hopes up on Thursday that we could see a good report here. We also had some good news from some other data reports. How do you look at those reports and this report? They don’t seem to square.

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