By: Dr. Lynn Reaser
September’s U.S. employment report depicted an economy still moving forward but with only tepid job growth. Nonfarm businesses added a mediocre 148,000 workers to their payrolls during the month. The average monthly gain for the third quarter was also less than 150,000 (143,000) in contrast to an average job gain of nearly 200,000 (195,000) during the first half of 2013. Businesses have turned more cautious as the economy continues to plod ahead at a pace of only around 2% in terms of real GDP (gross domestic product) growth.
September did see a slight drop in the unemployment rate from 7.3% in the prior month to 7.2%. This was the lowest level since November 2008. A few more people did look for work and found jobs, but the percent of the working-age population who are actively employed is nearly three percentage points below the level seen five years ago. Long-term unemployment remains a serious problem with 4.1 million people out of work for six months or longer.
Job gains, although modest, were generally widespread in September. Government hiring, particularly in education, was generally strong for the second month in a row. Banking and leisure/hospitality were among the few industries to shed jobs during the month.
Employees saw little additional money in their paychecks, with hourly earnings edging up just 0.1% between August and September. Compared with a year ago, earnings look a little better with a gain of 2.1%. This is ahead of inflation, with consumer prices now up less than 1.5% versus a year ago.
Although federal workers furloughed during the first two weeks of October will be counted in the next jobs report, October’s data on various economic indicators may be affected by the federal shutdown. In an environment of data clouded by the impact of the shutdown but no signs of an economic rebound, the Federal Reserve can be expected to continue to pump more money into the economy. This means more asset purchases (of government and mortgage securities) and zero short-term interest rates at least until year-end.