August jobs report: Don't blow a gasket it was just Market Basket

A group of clerks and cashiers managed to make an impact on America's monthly jobs report

September 5, 2014 7:00PM ET

by Sameepa Shetty @sameepa

The economy added 142,000 jobs in August — the smallest gain this year and way below economists’ expectations of 225,000 new jobs. The August number breaks the economy’s six-month streak of adding over 200,000 jobs a month. Bleak as it sounds, it really isn’t.

Here’s what happened in August. The economy added 69,000 fewer jobs than in July and 70,000 fewer jobs compared with the 12-month average before July. So who stopped hiring? And is it an anomaly or the start of a dismal trend?

Market Basket’s the culprit

Retail trade added no jobs in August, unlike in July, when it added 20,900 jobs, and the 12 months before that when it added an average of 23,800 jobs monthly. In fact, the retail trade area lost 8,400 jobs. Food and beverage stores took the biggest hit, losing 17,100 jobs in August compared with an average of adding 6,500 jobs.

The Bureau of Labor Statistics’ August report attributes the dip in retail trade job creation to “employment disruptions at a grocery store chain in New England.” An analyst with the bureau confirms to “Real Money” that Market Basket is the grocery chain referred to in the report.

The company is a low-price gourmet grocery chain with 71 stores in the Northeast. Hundreds of Market Basket’s 25,000 employees walked off their jobs to protest the ouster of CEO Arthur T. Demoulas. In response, the privately held company reduced hours for 20,000 of its part-time employees to zero in August, notes Bennie DiNardo, The Boston Globe’s associate business editor.

The auto effect

Strong demand for cars and trucks also helped distort August’s employment picture compared with the previous month. In July auto manufacturers hired more workers to ramp up production and shorten their typical July plant shutdown period. The report that month reflected that, with transportation equipment makers adding 20,200 jobs, blazing past the 12-month average of 5,600.

The no-show industries

Beyond retail, the trade, transport and utilities sector, usually among the biggest employers, added only 1,000 jobs in August, compared with an average of 48,100 jobs for the 12 months before July. Manufacturing didn’t add any jobs after a stellar 28,000 jobs in July, and construction gains tapered off as well.

Analytics firm HIS says the August report is “not weak enough to declare that a turning point is imminent” and that the September report will offer insight into whether the last month’s numbers were a blip or a trend.

Given the anomalies, from the Market Basket saga affecting August and strong auto demand affecting July, the August employment situation makes for isolated reading. In fact, NAMETK at Bank of America Merrill Lynch says that August payroll growth has been revised higher in 12 of the last 15 years by an average of 31,000.

Yet six and a half years after the economy peaked in December 2007, the U.S. economy has added just 768,000 jobs, causing economists such as Bill Rodgers, a former chief economist at the Labor Department, to call the recovery’s job growth “anemic.”