The Corner

Though Today’s Job’s Report Is Weak, There Are a Few Hopeful Signs

No two ways about it, today’s employment report was weak by the standard of the past few years. Job growth was slow, wages were flat, hours fell, and the labor force dropped. As a result, a rate hike in October is extremely unlikely.

Payrolls expanded by a tepid 142,000 in September, falling short of even the most pessimistic forecasts. Moreover, instead of being revised upward, which usually happens this time of year, recent months were instead revised down by 59,000. Meanwhile, civilian employment, an alternative measure of jobs that includes small business start-ups, dropped by 236,000.

Although the jobless rate remained at 5.1 percent, it’s nothing to celebrate as the labor force participation rate fell to 62.4 percent, the lowest since 1977. Worker earnings took a hit as well, due to a combination of flat earnings per hour and a slightly shorter workweek for those with jobs. As a result, total earnings slipped 0.2 percent.

However, not all the news was bad. Despite the decline in September, workers’ total earnings are up 4.5 percent versus a year ago and the expansive U-6 unemployment rate fell to 10.0 percent from 10.3 percent, as those working part-time for economic reasons fell to the lowest level since 2008.

The bottom line is that today’s report does not spell doom for the U.S. economy; we are not facing an impending recession. The third quarter of each of the past five years (2010–14) has had slower job growth than each of those years as a whole, and it looks like 2015 will be no different.

The job market never moves in a straight line, either up or down. There are always months that are slower or faster than the underlying trend and we just got two in a row that are slower. This has happened before and will happen again, just like we’ll get months like November/December 2014 when job growth averaged 376,000 per month. Remember not to get too excited when that happens again, just like you shouldn’t get depressed today; the underlying trend is still about 200,000 per month.

Other recent news supports this theme. Yesterday, automakers reported that cars and light trucks sold at an 18.2 million annual rate in September, up 9.9 percent from a year ago and the fastest pace since 2005. However, like a mirror image of job growth, don’t look for auto sales to stay at that level. Sales should stay strong, but not stay as hot as the past two months.  

Robert Stein is an economist for an asset-management firm and a former deputy assistant Treasury secretary for macroeconomic analysis.


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