Economists relieved by strong jobs report but still see worrisome signs
The strong September jobs report was a relief to economists after a surprising hiring slowdown the previous month.
But there were worrisome signs in Friday’s data about wage growth and discouraged workers that showed the recovery from the Great Recession has a ways to go.
FOR THE RECORD
Oct. 3, 12:14 p.m.: An earlier version of this post stated that the labor force participation rate declined in September for the third straight month. It was the second straight monthly decline.
“The trend is good. The trend is positive,” said Alan MacEachin, chief economist at Navy Federal Credit Union, the nation’s largest credit union. “But there were some things in the report that continued to cloud the picture.”
The topline numbers showed the labor market bounced back strongly last month.
The economy added a robust 248,000 net new jobs and the unemployment rate dropped below 6% for the first time since mid-2008, the Labor Department said.
Job growth in July and August also was revised up by a combined 69,000. That included lifting August’s disappointing initial estimate of 142,000 to 180,000.
The report triggered “a sigh of relief on both Wall Street and Main Street,” said Sung Won Sohn, an economist at Cal State Channel Islands.
“August was an aberration and we’re back to healthier growth and that’s good,” he said.
The Dow Jones industrial average was up about 113 points, roughly 0.7%, in early trading Friday.
Economists had expected job growth to get stronger last month after an August slowdown they had dismissed as probably an anomaly.
But the September increase was much better than the consensus forecast of 215,000 net new jobs and an unemployment rate holding steady at 6.1%. The unemployment rate fell to 5.9% in September, the lowest level since July 2008.
But part of the reason for the drop was that more discouraged workers dropped out of the jobs market.
That’s been a problem plaguing the recovery from the Great Recession and was one of the signs in Friday’s report that the labor market still is far from fully healed.
The labor force participation rate ticked down 0.1 percentage point in September, to 62.7%, the second straight monthly decline. Last month’s level matched the lowest since 1978.
About 97,000 adults dropped out of the labor force last month.
They accounted for about half of the 0.2-percentage-point decline in the unemployment rate, MacEachin said. The rest of the decline came because there were more jobs.
Another negative was continued weakness in wages.
Average hourly earnings dropped a penny to $24.53 last month and have risen just 2% for the year ending in September. For the 12 months ending in August, average hourly earnings had been up 2.1%.
“What you’re seeing is a jobs market that’s improving slowly but still with enough slack to keep wages flat,” said Harry Holzer, a professor of public policy at Georgetown University and a former Labor Department chief economist.
“When there’s a lot of slack in the labor market, employers can find the workers they need without having to raise wages,” he said. “It remains a buyers’ market and the buyers are the employers.”
MacEachin said the unemployment rate would need to fall below 5.5% before wages start improving.
Although jobs growth picked up and the unemployment rate dropped last month, economists said there was still enough concern about other labor market indicators that the new data were unlikely to push Federal Reserve policymakers to raise interest rates any time before the middle of next year.
“At the Fed, some people think wages are more important than the jobs right now, and until and unless wages go up more rapidly, they may think twice about raising interest rates,” Sohn said.
The labor market had been on its best hiring streak since 1997, adding more than 200,000 jobs a month from February through July before growth fell below that level in August.
Economists said the August figure appeared to be an aberration driven by a New England grocery store strike and a shift in when automakers shut their factories for annual summer retooling. August also is historically a tough month for job estimates.
Initial figures for August have been revised up by an average of 80,000 jobs in each of the previous four years. With another revision coming next month, it’s possible that August’s figure could rise above 200,000.
Part of the reason for September’s stronger job growth was a rise in retail employment of 35,000 net new positions.
Included in that was an increase of 20,000 jobs in food and beverage stores, largely reflecting the return of workers at the Market Basket grocery store chain in New England, the Labor Department said.
Professional and business services, along with healthcare, also saw strong hiring gains in September.
But hiring by manufacturers continued to be sluggish, and those are the type of good-paying jobs that would increase average wages.
Factory payrolls rose by just 4,000 net new positions in September, an improvement over August’s loss of 4,000 jobs but still not strong growth. Most of the sector’s growth came from producers of motor vehicles and parts.
Construction, another higher-paying field, added 16,000 net new jobs in September, the same as in August.
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