The Corner

More Improvement, but Not Enough

After last month’s disappointing jobs numbers, today’s report on the labor market showed more improvement. Payrolls rose 114,000 in September and 200,000 when upward revisions for prior months. The household population survey, an alternative measure of jobs that is more likely to include small-business start ups, increased 873,000, the most in almost ten years. As a result, the unemployment rate fell to 7.8 percent despite a 418,000 increase in the labor force. (The unemployment rate is down from 9 percent a year ago, even as the labor force is up a total of 805,000.)

In addition, total hours worked increased 0.4 percent in September and average hourly earnings rose 0.3 percent. Total cash earnings went up 0.7 percent, and are up 3.9 percent from a year ago. This proxy for consumer purchasing power means spending will continue to grow.

So no wonder we will see good headlines on today’s report, but the details were not quite as good as some of them might suggest. Private-sector payrolls were up 104,000 in September against an expected 130,000. In other words, the sector that beat the consensus in September was the government. Also, on net, all of the upward revisions to prior months were for government; private-sector revisions were down 5,000.

Manufacturing, in particular, looks softer, with payrolls in that sector down 16,000 in September after a 22,000 drop in August. (Only some of this is related to changes in the timing of auto retooling.) So it appears industrial activity, which led the early part of the private-sector recovery, is now losing steam. Also, the huge rise in civilian employment was goosed by part-timers, with a 322,000 overall gain and a 582,000 increase for those working part-time for economic reasons.

Although the labor-force-participation rate ticked up to 63.6 percent, it is still down from 64.1 percent a year ago.

After last month’s disappointing report, we wrote that “some of the fluctuations in job creation appear to be seasonal. . . . If these patterns continue to hold, expect a stronger jobs report next month.” What’s important now that we’ve seen the better report is to not get tricked into thinking the economy is anything more than a plow horse at this point, with modest economic growth and gradual improvement in the labor market.

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


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