Friday, October 2, 2015

FOMC | Job Numbers Flat (Updated Dec. 10, 2015)

Job numbers for September were close to August, after
a sharp downward revision - disappointing. 
Nonfarm payroll jobs rose 142,000 in September.  The unemployment rate remained at 5.1 percent, which is historically low. Jobs grew in health care and information, while mining employment fell along with oil prices.

The September job numbers are flat relative to August, even after (as the BLS also reported this morning) August jobs were revised sharply lower to show only 136,000 jobs added.

Both August and September job-increase numbers are down from prior months.

So far in 2015, payroll job growth has averaged 198,000 per month, below the average monthly gain of 260,000 in 2014.

ADP on Wednesday had indicated job growth of 200,000, up from 180,000 in August, so the job numbers are disappointing for those who were relying on ADP to anticipate a bullish BLS report.

Wages also fell in September.

This raises a question about whether the U.S. economy is ready for a rate hike by the end of 2015. Another way of putting it is that the job numbers could be used (legitimately) as a reason for not raising rates.

The report today was important because the FOMC meets on October 27-28 to decide whether to start a climb back to normal interest rate levels, which have been at the "zero bound" (between zero and 0.25 percent) since the financial meltdown of 2008.

The Fed has been sidelined since 2008 because it has used up its main weapon for encouraging job growth, namely the Federal funds rate. It can't start putting the the interest rate back up to a normal level without risking higher unemployment. Both the Fed and the financial markets are out of shape and the first increase in rates is worrisome.