‘Solid’ US Jobs Numbers in September

‘Solid’ US Jobs Numbers in September

The US economy added 156,000 jobs in September, a decrease from 167,000 the previous month, the Bureau of Labor Statistics announced on Friday. The unemployment rate rose ever so slightly from 4.9 to 5 percent, and average hourly earnings rose six cents to $25.79, making for 2.6 percent wage growth over the past year. Speaking to the New York Times, Diane Swonk, an economist in Chicago, calls the report “solid, not spectacular”:

“The good news is that participation went up, even though the unemployment rate did, too. Regaining that ground is very important.”

Before the report, economists on Wall Street looked for the economy to add 172,000 jobs in September. Revisions for July and August showed that 7,000 fewer jobs were created in those months than the Labor Department first estimated. In the wake of these figures, the Federal Reserve is still expected to raise interest rates late this year, and there was little in the report to suggest that the job gains might lead to inflation.

“There are still plenty of unemployed people out there, enough for employers to continue to hire at a substantial pace,” said Michael Gapen, chief United States economist at Barclays. “The expansion will end before you run out of labor,” added Mr. Gapen, who estimates that the unemployment rate could drop to 4 percent by the end of 2017.

The marginal uptick in the unemployment rate could actually be a positive indicator, reflecting growth in the labor force as people who had dropped out of it entirely start looking for work again, the Wall Street Journal observes:

The labor force—the number of adults who hold jobs or are actively looking for them—grew by 444,000 last month and by slightly more than 3 million over the past year. The labor-force participation rate—the share of the overall population in the labor force—stood at 62.9% in September, up a tenth of a percentage point from August and a half-point from a year earlier. It is still hovering near the lowest level since the late 1970s, in part due to the retirement of baby boomers but also because many working-age Americans have given up the job search.

Even with the latest progress, millions of Americans are underemployed. The share of residents who are jobless, involuntarily stuck in part-time work or too discouraged to look for a job stood at 9.7% last month, unchanged from August, but down from 10% a year earlier.

Reuters deduces that the lackluster numbers may make the Fed more hesitant to raise interest rates too quickly:

Fed Chair Janet Yellen has said the economy needs to create less than 100,000 jobs a month to keep up with population growth. Average monthly job gains have been about 180,000 this year, which Yellen has described as “unsustainable.” …

Yellen said last month that the Fed will likely raise rates once this year. It lifted its benchmark overnight rate at the end of last year for the first time in nearly a decade, but has held it steady this year amid concerns over persistently low inflation. Three Fed policymakers voted for a hike last month when the central bank kept rates steady. However, Friday’s data could boost the case of Fed officials who have vocally defended a go-slow approach to rate increases.

But at Forbes, Maggie McGrath hears from economists who expect the Fed to stay on course for an increase:

“There’s not a lot of news in the report, and that’s news in and of itself,” Brad McMillan, chief investment officer for Commonwealth Financial Network, said in a phone interview Friday morning. “People have been incredibly worried, but the economy by and large keeps knocking it out month after month after month. This shows that yes the healing process is ongoing; we have a normal — in many respects — economy. This is something we’ve been working towards for the last seven and eight years.”

According to McMillan and other economic experts, this report was “right down the middle” as far as what the Fed may do about interest rates: it doesn’t give them reason to raise rates in November, but nor does it provide ammunition for pushing off a rate hike to 2017.

“This keeps the Fed on track for a December rate increase,” Mark Hamrick, Bankrate’s senior economic analyst, said in a phone interview Friday morning. “It also takes the immediate pressure off of putting them in what would be the uncomfortable position about needing to feel more urgent about a November increase, which would come about a week before the election.”