Just the Facts

Five Facts on the September Jobs Report

By No Labels
October 5, 2018 | Blog

On Friday, the Labor Department released its monthly hiring and unemployment figures for the month of September.  While the report revealed slower job growth than had been predicted, it also marked the lowest unemployment rate in decades and an economy that has sustained an impressive rate of topline growth.  Here are five facts on the September Jobs Report:

The United States added 134,000 jobs in September, missing economists’ forecasts of 180,000

The relatively low number of jobs added this past month represents the slowest pace of job growth in a year.  However, economists have pointed to Hurricane Florence, which devasted large areas of the East Coast, as a significant reason that numbers were not as high as forecast.  Additionally, Jim O’Sullivan, chief U.S. economist at High Frequency Economics explained that “September data have shown a tendency in recent years to be underreported initially, and revised up later.”  However, if the decline in job growth turns into a trend, it could signal bigger issues for the U.S. economy.

The unemployment rate fell to 3.7% in September, its lowest level since 1969

Despite new hires missing expectations, the unemployment rate dropped lower than estimates, which economists had expected to be 3.8%.  This represents the lowest jobless rate in the country since December 1969, when unemployment hit a low of 3.5%.  It also represents a significant improvement from the 10% unemployment rate that existed amid the Great Recession in October 2009.

Average hourly earnings for private sector workers rose 8 cents to $27.24 an hour and are up 2.8% over the past year

While any increase in average earnings is a positive sign, the year-over-year wage growth dropped .1% from 2.9% in August. In theory, wage increases are consistent with a tightening labor market, however, economists hypothesize that several factors have constrained wage growth.  Michael Pearce, senior U.S. economist at Capital Economics in New York stated“The weaker gain in payrolls in September may partly reflect some hit from Hurricane Florence.” Another possibility is that the measure for the unemployment rate accounts only for people looking for work. But the labor-force participation is just above multidecade lows at 62.7%, near the smallest share of adults participating in the labor force since the late 1970s. As The Wall Street Journal notes, “a relative abundance of Americans on the sidelines is one factor economists point to for modest wage growth.”

The report shows that the economy has largely been able to withstand the political turmoil and trade disputes that have been an area of concern

Over the past several months economists, bankers, and politicians alike have expressed concern over growing trade disputes between the U.S. and several of its key trading partners, including Canada, Mexico, the European Union, and China. While the U.S., Canada, and Mexico were able to reach an agreement on a new version of the North American Free Trade Agreement, dubbed the USMCA , many questions remain as to whether the U.S. and China, the world’s two largest economies, will be able to reconcile their differences.  However, despite these concerns, the economy has continued to grow at an impressive rate, with Federal Reserve Chairman Jerome Powell recently stating that the U.S. economy’s outlook was “remarkably positive” and that the country was on the cusp of a “historically rare” era of low-unemployment and low-inflation.

The September jobs report makes it likely that the Federal Reserve will raise rates at least once before the end of the year

Central banks use rate hikes to deliberately curb growth in an effort to keep economies stable, prolong growth rates, and limit inflation and periods of economic decline. Fed Chairman Powell has already raised rates three times in 2018, most recently raising the benchmark federal funds rate to a range of 2-2.25% on September 26.  In a recent speech, Chairman Powell explained the delicate balance the Fed is trying to strike: “Removing accommodation too quickly could needlessly foreshorten the expansion” while “moving too slowly could risk rising inflation and inflation expectations.” Powell stated that his goal is to follow a strategy “designed to balance these risks.”

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