The total number of people employed rose by 103,000 in September. That is much better than consensus expectations for a gain of 60,000. This report was also better than the ADP report on Wednesday, which was also an upward surprise – though not a big enough one. That report showed 91,000 private sector jobs created, and the expectations were for the BLS to show 83,000 new private sector jobs.
The “actual” BLS number of private sector jobs was 137,000. Government payrolls declined by 34,000. The Federal government employment fell by 1,000 jobs. The State level added 2,000 but the Local levels laid off 35,000. The pace of government layoffs rose sharply from last month when a total of 15,000 government jobs were actually added (revised from a loss of 17,000).
Unemployment Stays at 9.1%
The unemployment rate, which is derived from a separate survey was also unchanged at 9.1%. That was inline with what the consensus was looking for. The Household survey was noticeably more upbeat than the Establishment survey. pointing to a gain of 398,000 jobs.
The Civilian Participation rate rose to 64.2% from 64.0%, but is down from 64.7% a year ago. In other words, the unemployment rate was unchanged even though people were coming back into the labor force. This is the second month in a row that has happened, and it is a very encouraging sign.
The percentage of people over the age of 16 who actually have jobs rose slightly to 58.3% from 58.2% (employment to population ratio, or the employment rate). However, July’s levels of both the participation rate and the employment rate were the lowest since 1983, so the small increases hardly mean that happy days are here again.
Positive Revisions
The weak numbers for June and July were revised higher, but are still far from robust. In July we “actually” gained 127,000 jobs, not the 85,000 reported last month, and higher than the first read of just 117,000 jobs gained. In August, we gained 57,000 jobs, well above the unchanged reading reported last month.
The upwards revisions were also a very positive sign. The upward revisions came mostly from the public sector. The private sector revisions were up slightly for August, with a total of 42,000, not 17,000 jobs gained. In July, 173,000 private sector jobs were added, not the 156,000 reported last month or the 154,000 initial read.
The government actually added 15,000 workers in August, not the loss of 17,000 reported last month. In July, government payrolls were actually down by 46,000, not 71,000 as reported last month, but still worse than the first read of a loss of 37,000.
Household Survey Even More Upbeat
The household survey showed a gain of 398,000 jobs in September. In August, it showed a gain of 331,000 jobs. However it was more downbeat in July, and showed a drop of 38,000 jobs. The number of people unemployed according to the household survey, on the other hand, rose by 25,000 in September on top of a 36,000 rise in August. This was after falling 156,000 July.
However, generally the numbers from the household survey are considered less reliable than are the numbers from the establishment survey. That does not mean they should be disregarded entirely, and the divergences between the two series are often the biggest near turning points in the economy. The household survey does a much better job of picking up people who are self-employed — and of very small start-up businesses — than does the establishment survey.
Discouraged Workers Pounding the Pavement Again?
The rise in both the number of employed and the number of unemployed means that the civilian labor force increased. Some of that is simply due to a growing population. However, it also indicates that some discouraged workers have re-entered the workforce and are actively looking for work now, rather than seeing the situation as being so hopeless that it is not worth the gas money to drive to an interview.
The unemployment rate remained at 9.1% for the third month in a row. A year ago the unemployment rate was 9.6%. The civilian participation rate — or the percentage of people in the labor force, both employed and unemployed — was rose to 64.2 from 64.0% in August and 63.9% in July. That is good news, but hardly cause for celebration as the July number was the lowest since May 1983. We were also coming out of a nasty recession at that point, and women were still far less involved in the workforce than they are today. It is down from 64.7% a year ago.
The employment to population ratio, or the employment rate, also rebounded slightly, rising to 58.3% from 58.2% in August and 58.1% in July. The July number was the lowest since July 1983. It was at 58.5% a year ago.
At this point in the cycle, it is normal for the participation rate to rise. That makes it harder for the unemployment rate to fall, but is still good news. The unchanged unemployment rate in the face of the rise in the participation rate is one of the more significant positive aspects of this report.
However, it is also true that the drop in the unemployment rate from 9.6% a year ago to the current 9.1% is essentially an illusion caused by the fall in the participation rate from 64.7% to the current 64.2%. A fall in the unemployment rate from a falling participation rate is not really such great news.
Average Work Week
For all employees, the length of the average work week rose to 34.3 hours from 34.2 hours in August, and matched the July reading. A year ago it was at 34.2 hours. For production and non-supervisory employees, the length of the average work week also ticked up to 33.6 hours from 33.5 hours in August and matched the July level. It is up slightly from 33.5 hours a year ago.
While a rise of an average of 6 minutes per week might not sound like a big deal, multiply it by the 131.334 million workers in the economy, and yes it is a big deal (to the extent it was really a 6 minute drop, and not smaller due to rounding). The very flat trend in average hours over the last year or so is extremely strong evidence that the overall anemic job growth is not due to excessive regulatory fears by businesses from things like health care reform.
If the reluctance to hire were due to fears of higher costs that will be imposed starting in 2014 due to health care reform for hiring an marginal employee, but that there were still profitable business opportunities available, then the obvious thing for a business to do would be to have its existing workforce work longer hours. With the average work week still very low by any historic standard (although up from a very low 33.0 hours for production workers at the bottom of the recession) it is clear that the problem is that there are not enough customers, not that businesses are afraid of Obamacare.
Average Hourly Earnings
Average hourly earnings for all employees rose to $23.12 from $23.08 (and matched the level of July) and are up 1.85% from $22.70 a year ago. Average hourly earnings for production employees rose $0.03 to $19.52 for the month, and is up 1.98% from $19.14 a year ago. The year-over-year changes are not great, but then again inflation is pretty low as well.
Income growth in the middle and lower half of the income distribution has been sorely lacking, not just recently, but for over a decade. Well actually, it has been pretty bad for the bottom 90% of people, but particularly anemic for the lower half of the income distribution. Higher incomes for those who are working means higher sales and more quickly repaired household balance sheets. Slow growth or actual declines mean lower sales and less progress on balance sheet repair.
The anemic growth in average hourly earnings is not a good thing for the economy, although it is good news for corporate profits, and hence the stock market, at least in the short term. It also means that it will be tough for a generalized increase in overall prices (aka inflation) to occur, as opposed to increases of relative prices of highly visible prices such as food and gasoline.
While the unemployment rate is better a year ago, most of that is a mirage due to falling participation rates. The recent rebound in participation rates, which will be explored much further in my next post, are an extremely important positive sign, one that will probably be underappreciated in most of the reports on this report.
However, it has to been seen inside the larger context of a massively downward longer-term trend. A falling participation rate is not exactly a new development — it has been in a downtrend for a decade now — but the decline has been very steep in the Great Recession and has yet to really turn around.
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