With job growth projected in the 200,000+ level for September 2015, the tepid 142,000 jobs added did not sit well with the markets. Even uglier, the Bureau of Labor Statistics readjusted downwards the July jobs creation numbers from +245,000 to +223,000 and August from +173,000 to +136,000 for a combined decline of 59,000 jobs. On an annualized basis, the U.S. added a net 2.752 million jobs equating to a 1.97 percent growth rate – the lowest gain in more than a year.
The following chart shows the monthly job creation comparing 2014 and 2015. U.S. 2015 monthly job growth has under-performed 2014 now for four consecutive months.
The restatement of the July and August 2015 employment gains change the trajectory and overall perspective of economic growth. Prior to the restatement, each of the nine months from December 2014 through August 2015 had an annualized job growth of 2.9 million net new jobs or greater. Prior to those nine months, the last time 2.9 million or more jobs were created within a 12-month period was June 2000. Annualized job growth is shown in the following graph commencing January 2011.
Other details in the September jobs report include:
- Unemployment Rate remained unchanged at 5.1 percent with 7.9 million currently categorized as unemployed
- Labor Force Participation Rate fell to 62.4 percent, the lowest seen since 1977
- Involuntary Part-Time Workers (employed part time but desire a full-time job) fell by 447,000 to 6 million
- Persons Unemployed for Five Weeks or Less increased by 268,000
- Long Term Unemployed (without a job for 27 weeks or more) totaled 2.1 million accounting for one-out-of-very-four unemployed (26.6 percent)
- Marginally Attached (want a job, not counted as unemployed since they have not looked for a job in the past four weeks nor were they included in the work force) totaled 1.9 million, declined by 305,000 from a year ago
- Discouraged Workers (included in the Marginally Attached but are not looking for a job since they believe there are no jobs for them) totaled 635,000 in September
- Healthcare added 34,000 net new jobs in September 2015 and has averaged 38,000 monthly in the past 12 months
- Professional and Business Services, which added an average 45,000 per month in 2015 increased by 31,000 in September 2015
- Retail Trade grew by 24,000 in September and averaged 27,000 monthly in the prior 12 months
- Food Service and Drinking Places added 21,000 jobs last month and 349,000 in the prior 12 months (29,100 average monthly)
- Mining which has lost 102,000 jobs in 2015 including 10,000 in September
To read the entire press release from the Bureau of Labor Statistics and related data click http://www.bls.gov/news.release/empsit.nr0.htm
The Federal Reserve, which has not changed policy and increased the Fed Funds rate since 2008, continues to sit idly by as the economy continues without direction and a heading. I believe the Fed’s inactions earlier this year have only two possible explanations:
- They already are aware of pending negative economic data that requires going forward with an almost zero Fed Funds Rate Target
- The Fed is paralyzed with fear of doing something wrong on which they will be blamed
I believe it is the latter and not the earlier of the two that the Fed faces. By not increasing rates earlier in 2015, they now cannot cut rates to stimulate the economy. This perpetuates the low interest rate environment which provides little incentive to invest capital. I believe that is partially responsible for the weak jobs report. We may be looking at QE 4 soon if the Fed reacts the same.
Just my two cents.
Ted