There was a lot of important information on the U.S. economy released this week but the biggest data point is without a doubt the latest monthly job report from the Bureau of Labor Statistics (BLS) out this morning. Indeed, total nonfarm employment in America rose by 156K payrolls in September, below the +168K consensus estimate and down from August’s upward-revised +167K gain. The July figure was revised lower by 23K payrolls, which altogether helped pull the 3-month average (less-volatile) jobs gain down to +192K. However, that is still an overall healthy pace of job creation that remains well above many Federal Reserve (Fed) officials’ estimates for what is needed to keep up with U.S. population growth. In fact, this average is historically quite high and should therefore drift lower over time as the economy nears full employment. Regardless, Septembers’ headline gain was the 72nd consecutive month of net job creation in this country, the longest such string in U.S. history.
As for joblessness in September, the official unemployment rate (U-3) ticked higher to 5.0 percent, the second-lowest “election-eve” reading in recent history. This slight increase was due to a 444K spike in the size of the U.S. labor force, an encouraging sign that more people are reentering the job market because of greater optimism about their employment prospects. However, the underemployment rate (U-6) was unchanged last month at 9.7 percent, implying that there are still millions of Americans who want full-time jobs but remain stuck with part-time work. As for wage growth, hourly earnings for production and nonsupervisory workers are growing at the fastest annual pace since 2010 but this is being undercut by reductions in the workweek, and we are still clearly creating more low-wage jobs on an absolute basis. Headline average hourly earnings rose by 0.2 percent last month, and have grown 2.6 percent over the past year. Although near the best levels of the recovery, compensation gains remain weak compared to past economic cycles and continue to provide few signs of increased inflationary pressure, thereby undermining any arguments that inflation is returning to the Fed’s target. Unsurprisingly, the market-implied odds of a rate hike occurring at next month’s Federal Open Market Committee (FOMC) meeting fell immediately after the release of the September job report.
Sources: Econoday, Twitter, Bloomberg, ZH, U.S. DoL, FRBSLPost author: Charles Couch