173,000 Jobs Added in August; Unemployment Rate Drops to 5.1%

WASHINGTON, DC—This morning the Bureau of Labor Statistics reported that the US economy added 1730,000 jobs in August.

The unemployment rate dropped to 5.1% from 5.3%.

It was a disappointment as economists had predicted a slightly higher level and indeed, the Labor Department noted that the employment growth has been averaging about 247,000 new positions a month.

One important bright spot though: average hourly earnings for all employees rose by 8 cents to $25.09, following a 6-cent gain in July.

Not surprising, analysis turned immediately to what these numbers could mean for the Federal Reserve Bank, which is pondering a decision to raise interest rates next month.

A closer look at the report suggests that it is not as bad as the top line number indicates, according to Fannie Mae Chief Economist Doug Duncan. "While the Fed could find reasons to delay raising rates, including increased downside risk for inflation and financial instability, we believe that it will not find one in this jobs report," he says in a prepared statement.

His reasons? Besides the increase in average hourly earnings there was a tick up in the average work week. The unemployment rate is now at a seven-year low and the labor force participation rate held steady at 62.6% for the third consecutive month. Finally, he said that August payroll gains typically get meaningful upward revisions.

Certainly this is a pattern with many economic indicators, including GDP.

Fannie Mae is still calling for a September lift-off, Duncan says, "with a one-and-done hike this year on the way to normalizing monetary policy going forward."

To be sure, not everyone sees it this way. "If the Fed thought their decision was complicated before, this morning's employment report will now make it that much more challenging for the Fed to reach a unanimous decision in September,"  Stifel Fixed Income Chief Economist Lindsey Piegza says in a prepared statement.

"The Hawks will be balking at the further decline in the civilian unemployment rate, however, as we have now been trained to realize, the unemployment rate alone does not tell the true health of the labor market," she said. "With the 'full' unemployment rate still firmly above 10%, coupled with a substandard, sub-200 headline reading, the Doves also have a robust argument that the momentum in the US labor market has slowed."

For commercial real estate specifically, the long-term outlook as can be discerned from these numbers, remains solid, according to JLL's Mid-Atlantic Research Director Scott Homa.

"Overall, the sustained increases in office-using employment since the start of the year should boost demand for commercial real estate as companies continue to add headcount across a range of industries and geographies over the next several quarters," he tells GlobeSt.com.

"An impending shortage of talent for highly skilled jobs should mean greater wage growth and employee confidence in a more upbeat hiring and real estate market."

There are certainly lingering risks on the horizon, he adds, such as the recent market turmoil in China and choppy economic conditions across many emerging markets.

"However, we remain confident in the long-term stability and durability of the US economy, especially as it relates to high-growth sectors like technology and healthcare."