Friday, October 3, 2014

JOBS | Strong Growth, Jobless Rate Falls to 5.9% (Comment)

Jobs Grow Faster in September,
Unemployment Below 6%
Summary. The BLS jobs report for September [link is to the archived BLS News Release] supports the growing consensus that the economy is breaking out of its slow-growth mode. The payroll jobs increase is a healthy 248,000 - and would be 317,000 if we added in the BLS's upward revisions in the July and August job numbers. Unemployment fell to 5.9 percent, falling for the first month since 2009 below 6 percent.

The September numbers and retroactive revisions bring the BLS reports more in line with economic forecasts of faster recovery for the August payroll jobs and unemployment rates.

Payroll Jobs. Nonfarm payroll jobs grew by 248,000 in September, with notable increases in retail trade, health care service, and professional and business services. This is well above the 213,000 per month average gain over the previous 12 months. The September increase is after combined upward revisions of the July and August numbers by 69,000 jobs, so the picture has improved by 317,000 jobs since June.

The good news extends to individual sectors such as professional and business services, which added 81,000 jobs in September, well above the 56,000-per-month average gain in the previous 12 months. The professional-services gains were concentrated among temp and other employment services, management consulting, and architectural and engineering firms - but law-firm jobs fell by 5,000.

These increases were on top of upward revisions in job numbers for July (by 31,000 jobs) and August (by 38,000 jobs).

Unemployment.  The September unemployment rate declined by 0.2 of a percentage point to 5.9
percent, the first time it fell below 6 percent since 2009, in mid-recession. The drop in the unemployment rate resulted from a decrease in the number of unemployed persons by 329,000 to 9.3 million. The September unemployment rate was 1.3 percentage points below the number in September 2013. The number of unemployed persons fell by 1.9 million.

September unemployment rates declined from August, seasonally adjusted, for
  • adult men, 5.3 percent
  • whites, 5.1 percent
  • Hispanics, 6.9 percent. 
The rates changed little, seasonally adjusted, for
  • adult women, 5.5 percent
  • teenagers, 20.0 percent
  • blacks, 11.0 percent
The rate for Asians was 4.3 percent, not seasonally adjusted, little changed from a year earlier.

In September the number of discouraged workers fell to 698,000, a decline of 154,000 from a year earlier.

White House Blog on Job Numbers, Jason Furman . Data on August economy in New York City and the NYC Metro Area.


Saturday, Oct. 4 - The New York Times this morning, with two reporters'  names at the top and two more at the end of the story, notes the higher jobs and lower unemployment, and, looking for a new angle, adds in the headline: "Sunny News May Not Bolster Democrats."

GOP-leaning John Crudele at the NY Post, by contrast, argued that the good numbers will help Democratic candidates "because issue No. 1 with Americans is the economy. In addition to the unexpectedly strong job growth, the unemployment rate broke through the 6 handle."

Let's look at the NY Times case for their sceptical take on the good news. It is stated in para. 2 and is supported starting in para. 11.

  • 1. The economic news is good.
  • 2. But the news "appeared to be too little, too late to bolster the prospects of Democratic candidates facing voters".
  • 3. Weak support for the statement in para. 2.
  • 4-10. More good news, not supporting para. 2.  at all.
  • 11. "[V]oters' opinions on the economy tend to lag considerably behind the actual numbers. [The new data] could help lift President Obama's party [but not until] in 2016." Doesn't that depend on how well Democratic candidates get out the word? Surely it doesn't take two years for data on jobs to percolate down to voters in the age of social media (see paras. 18-19).
  • 12(a). "The employment rate ... of women, young people and black voters - did not improve in September." The actual BLS language is that it "changed little" in September. The tables accompanying the story show that unemployment among teenagers was down by 1.3 percentage points from September 2013 but rose 0.4 percent from August. But among blacks the rate was down by two full percentage points below September 2013 and was down 0.4 of a percentage point below August 2014 - still high, but both numbers are improving.
  • 12(b). "Nor did the numbers of people employed part time because they could not find full-time work." The number shown in the Times table is 7.1 million people in this status, down 2.4 percent from August and down 10.2 percent from September 2013. Both numbers are improving.
  • 13. "The actual percentage of working-age people with jobs - 59 percent - has not changed for four months ... the lowest level since 1978." This number doesn't change much, relative to the unemployment rate, by its nature. The unemployment rate is based on a monthly telephone poll of a relatively small percentage of households. The employment to population ratio is an aggregate number divided by a population estimate. A major reason it increased after 1978 is women were entering, and staying in, the work force in much greater numbers. Maybe we are seeing a long-term shift in how and where people work, and their preference for leisure and spending time at home - not just discouraged workers.
  • 14-15. Rep. Kevin Brady (R-TX), Chairman of the Joint Economic Committee, says Obama has held back recovery.
  • 16. "Hourly earnings are stuck in the mud, down slightly in September." But the table immediately adjacent shows hourly earnings grew 0.2 percent in September over August and 2.2 percent over September 2013.
  • 17. "Economists said the slow pace of wage gains despite the sharp drop in the unemployment rate was a continuing puzzle..." Unemployment may just not be low enough to drive higher wages, and other factors are at work. But the Phillips Curve, the tradeoff between unemployment and inflation documented decades ago by LSE Professor A. W. Phillips, still lingers in the thinking of central bankers everywhere because no one has found a better core model.
  • 18-19. Pollster Peter Hart says that despite the speed of communication made possible by social media, opinions still take along time to change. "What you're telling me is the water in my basement has dropped a third, but what I'm telling you, I've got water in my basement." However, an unemployment rate below 6 percent is not water in the basement. Historically, the 6 percent unemployment rate was the level below which inflationary pressures were supposed to start.
  • 20. Polling by Hart and Republican William McInturff showed in August that four out of 10 Americans say they have been directly harmed by the recession starting in 2008. Independents were much more likely (51 percent) to report that a member of their household lost a job than Democrats or Republicans (38 or 39 percent).
  • 21-26. More good news relating to the economy, and statements from Democrats that their economic policies are working.
  • 27. Concern about 4.8 million workers "missing from the job force". See my comment in para. 13.
  • 28-32. The rest of the story raises the question of the impact of the good job numbers on Fed interest-rate policy. The Fed did not expect 5.9 percent unemployment before the end of 2014, at the earliest. The President of the traditionally hawkish St. Louis Fed, James B. Bullard,  is quoted as saying that the Fed ought to start raising interest rates before mid-2015.  However, the consensus is that Janet Yellen's Fed is cautious about over-reacting to good economic news.

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