Disappointing Jobs Report: 142,000 Jobs Added In September, Unemployment Rate Stays 5.1%
The Bureau of Labor Statistics released a significantly weaker than expected September jobs report Friday morning. The lackluster report marks the second month in a row job gains came in light.
The latest employment data shows American employers adding just 142,000 jobs last month. The report also shows the unemployment rate was steady at 5.1% for the second month in a row. Economists were anticipating 200,000 payroll additions and for the unemployment rate to remain the same.
Revisions to prior months’ data were disappointing as well. Gains for August, initially recorded at 173,000, were revised lower to 136,000. The last month of summer is notorious among economists for coming in low and being revised higher in September and October, so the 37,000 job decline was a big negative surprise. Meanwhile, the July count was also revised lower to 223,000 from the latest reading of plus 245,000 jobs.
Net total employment gains in July and August were therefore 59,000 lower than BLS previously reported. Gains were also well below the year-to-date average of 198,000 monthly jobs added.
“Every aspect of the September jobs report was disappointing,” wrote Michelle Girard, chief U.S. economist at RBS, echoing a sentiment widespread among economists sending out response notes, as well as among investors. Equities were deep in the red Friday morning, with the S&P 500 Index, Dow Jones Industrial Average and Nasdaq Composite each down about 1.5% after the first half hour of trading. The yield on the 10-year Treasury note was at around 1.92% after closing Thursday at 2.04%.
The sea of red in markets marks a bit of a shift in sentiment. In recent years weaker than anticipated jobs figures had often been followed by market gains, or just very modest declines, because they taken as a sign the Federal Reserve could keep access to money easy for longer. As the policy makers becomes increasingly anxious to act, it seems markets may be fed up with the uncertainty and concerned about what the report says about the U.S. economy.
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In an interview Friday, Andrew Chamberlain, chief economist at job search site Glassdoor, noted that the American economy has been resilient with a record 60 months in a row of job gains, but the numbers show the U.S. will eventually be affected by slowing growth in Europe and China. Girard similarly wrote, “While these data do not shake our confidence in the ongoing health of the US economy (i.e. we are not worried about the US economy slipping into recession), these results will give the Fed pause and raises the hurdle for action this year.”
Federal Reserve policy makers kept interest rates near zero at their September meeting, citing concerns about economic woes across the globe impacting the otherwise strong U.S. economy. According to the Chicago Mercantile Exchange, just 2% of futures investors expect the Fed to move at it’s October meeting; 29% say December. The chances don’t cross 50% until March. Traders can use Fed-funds futures to wager on timing and pace of interest rate moves.
Chamberlin agrees that numbers like this are not reassuring to Fed, but points out rates can’t stay at zero forever. Noting, “Stimulus seems great the same way drinking an energy drink seems great. But you can’t just drink energy drinks for every meal. There eventually will be consequences.”
“Numbers like this feed into this market perception that it is going to be more difficult for the Fed to exit from unusually accommodative monetary policy setting,” noted Jeremy Lawson, chief economist of Standard Life Investment, in an interview Friday morning. “The external environment plus the secular weakness in the ability to generate wages and inflation means it is going to be hard for the Fed to get off the zero lower bound than they anticipated.”
Those wages Lawson mentioned? Average hourly earnings declined a penny in September to $25.09. The 12-month wage growth rate is therefore 2.2%. Pre-recession normal year-over-year wage gains were between 3% and 4%. The workweek dropped from 34.6 hours to 34.5 hours. Lawson also noted that most people anticipated a hiring slowdown in good producing sectors, since those are most directly hit by trade declines when world economies suffer. More surprising was the slow down in service providing industries.
Among the sectors that added the jobs more slowly than in prior months was professional and business services, which added 31,000 versus a 2015 average of 45,000. Hiring in industries like health care and retail trade were slower than the year-to-date average but not as sharply. The mining industry lost 10,000 jobs.
Other key figures included:
At the end of September 7.9 million Americans were unemployed, down 1 million year-over-year. In September there were 635,000 discouraged workers — people not currently looking for work because they don’t believe jobs are available for them and therefore are not considered unemployed — which is little changed from a year ago.
The labor force participation rate declined to 62.4% after three months in a row at 62.6%. Participation remains near the lowest levels in decades. The U-6 rate, which measures under-employment, came in at 10% in September versus 10.3% in August and down from 11.3% a year earlier. The employment-population ratio was 59.2% from 59.4%.