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A Mediocre Jobs Report



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Another mediocre report on the labor market. The headline payroll number grew 148,000 in September, which was below consensus expectations. Revisions to prior months added 9,000, but all due to government; including revisions, private payrolls were up a tepid 108,000 in September. Civilian employment, an alternative measure of jobs that includes small-business start-ups, increased 133,000, confirming plow-horse growth in September.

The best headline in today’s report was that the unemployment rate ticked down to 7.2 percent and did so despite a 73,000 gain in the labor force. In the past year, the jobless rate has declined 0.6 percentage points even as the labor force has grown 378,000. However, don’t get too excited about the decline in the unemployment rate in September. Unrounded, the jobless rate was 7.235 percent in September versus 7.278 percent in August, so there really was very little change.

The details of the report show a 0.1 percent increase in total hours and a 0.1 percent increase in average earnings per hour. As a result, total cash earnings are up 4.2 percent in the past year. Meanwhile, consumer prices are up roughly 1.2 percent, suggesting “real” (inflation-adjusted) earnings are up 3 percent from a year ago, consistent with our view that consumer spending will accelerate in the year ahead.

Also, we can’t help but notice that today’s report destroyed one of the recent negative stories about the job market. Data on part-time work is very volatile from month to month; part-timers fell dramatically late in 2012 and then rebounded sharply in early 2013. As a result, some pessimistic analysts (inappropriately) ignored the major drop in part-time work late in 2012 and fixated on the numbers starting in January to argue that most of the growth in jobs “so far this year” was due to part-timers. But part-timers fell 357,000 in September and are now down 442,000 versus a year ago.

We also note that the expansive (U-6) definition of unemployment which includes discouraged workers and part-timers who say they want to work full time, ticked down to 13.6 percent in September. Normally, whether in good times or bad, the U-6 jobless rate is about 80 percent higher than the regular unemployment rate. Right now that gap is 89 percent, which is within the historical range, although on the upper portion.

One more notable detail was that the share of voluntary job leavers (quitters) among the unemployed rose to 8.8 percent in September, tying the highest so far in the recovery. Fed vice chairwoman (and soon to be chairwoman) Janet Yellen thinks a higher share of quitters among the unemployed is a sign of improvement in the labor market, just like a drop in the jobless rate itself, so this indicator deserves to be watched.



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