Unemployment Rate Falls to 7.8 Percent in a Jobs Data Disconnect
- The September Payroll Employment Survey showed a gain of 114,000 jobs, near consensus expectations.
- The Unemployment Rate for August fell to 7.8 percent as the household survey of employment soared.
- According to the Household Survey, a staggering 873,000 jobs were created in September.
- The Average Workweek on private nonfarm payrolls increased to 34.5 hours.
- Average Hourly Earnings increased by 0.3 percent in September, up 1.4 percent over the last year.
September jobs data went in several directions at once, providing an overall improving view of labor market conditions, if somewhat unconvincing. Payroll job growth increased by a modest 114,000 jobs in September, slightly better than the original print for August, which was +96k. However, there was a substantial 86,000 combined upward revision to July and August. So now the August gain is reported at +142,000 and the July gain is reported at 181,000. So we can say that there has been a significant improvement in payroll job growth in the third quarter over the very weak second quarter. But now within the third quarter we see a downward trend…+181k for July, +142k for August and +114k for September. Expectations for job growth in October should remain modest. The unemployment rate dipped to 7.8 percent in September, down from 8.1 percent. This was driven by a huge 873,000 job gain in the household survey for September, following outright declines of 119,000 jobs in August and 195,000 jobs in July. The massive disconnect between the payroll survey and the household survey of employment over the entire third quarter should leave everyone less confident about what the September jobs numbers are saying about the economy. The September gain in the household survey of employment was the largest monthly increase in that series since June 1983. Broad themes not contradicted by today’s data: (1) payroll job creation is subdued due to weak hiring; (2) the unemployment rate indicates significant slack in the labor market; (3) the Federal Reserve will keep QE3 engaged well into 2013; (4) Q3 real GDP growth likely improved from the weak 1.3 percent growth rate of Q2. The jobs report for October is due out on Friday November 2, before Election Day the following Tuesday.
Payroll job gains were mixed across industries. Construction employment increased by 5,000 in September, boosted by residential construction. Manufacturing employment declined by 16,000 jobs with losses spread over a range of durable goods industries. Retail trade added 9,400, perhaps boosted by more seasonal hiring than usual. Financial services added 13,000. Business and professional services employment increased by a weak 13,000. Within that category, temporary help services employment declined by 2,000, a negative indicator for future hiring. Education and healthcare added a solid 49,000 jobs in September. Leisure and hospitality added 11,000 jobs. Government employment increased in September by 10,000 jobs.
Market Reaction: U.S. equity markets opened with gains. Treasury bond yields are down. NYMEX crude is down to $90.86/barrel. The dollar is up versus the yen and down against the euro.