A More Detailed Review of September’s Jobs Report Suggested a Less Favorable Picture
At the time of original publication, the article described the following: Readers of the blog may have seen the original article’s recent prediction that September’s jobs report would fall short of expectations. That prediction proved incorrect: jobs created during the month exceeded expectations by 28,000. On the Friday referenced in the original publication, the Bureau of Labor Statistics announced 248,000 new non-farm jobs for September and an official unemployment rate of 5.9%.
As anticipated at publication, financial markets reacted favorably; the Federal Reserve’s ongoing reduction of bond purchases appeared to have made little difference to hiring.
At the time of original publication, the article described the following: The article also reported that the dollar strengthened following the news, while gold and silver continued a recent decline below support levels of $1,200 and $17 per ounce, respectively, before a modest rebound early that week. On its face, the report suggested an economy operating strongly and employment returning to pre-recession conditions. The article argued that a closer review instead showed continuing structural weakness in employment.
The original article identified three figures that, in its view, indicated an economy far from healthy and possibly approaching a slowdown.
62.7%
One number that did not receive headline attention on the Friday cited in the original article was the labor participation rate, which had declined to a 36 year low of 62.7%. The article considered it more revealing that people outside the workforce rose by 315,000 from the prior month, exceeding the BLS headline figure. It said the 315,000 people who left the workforce in September brought that total to a record 92.6 million. In the article’s view, the low participation rate suggested that employment conditions were less positive and many people struggled to find work in their chosen fields.
At the time of original publication, the article described the following: The original article pointed to a then-recent piece from IB Times reporting higher unemployment among recent college graduates.
155.9 Million
At the time of original publication, the article described the following:
This recent article from David Stockman was described as a useful breakdown of U.S. employment conditions at publication. The article emphasized its surprise that the civilian labor force had grown only one million, to 155.9 million, since the financial crisis began in October 2008, while the working-age civilian population rose by 14 million. It presented this contrast as an explanation for the then-36-year low participation rate. Stockman highlighted 102 million as the report’s most important figure: in his interpretation, the combined count of adults neither participating in the workforce nor employed, equal to 41% of adults. The article concluded that participation deserved more attention than monthly BLS headline statistics.
59%
The article reasoned that if 41% of adults were outside the workforce or unemployed, the employment-to-population ratio would be only 59%. It compared that figure with just under 62% six years earlier and 64.2% in 2000. If employment were genuinely improving, it argued, this ratio should rise rather than fall.
At the time of original publication, the article described the following: James Abate also noted the weak employment-to-population ratio in a recent Forbes article. The article cited it as support for his view that the Federal Reserve might tighten monetary policy more slowly than many experts expected at that time. When considered alongside the article’s reference to a then-recent Peter Schiff YouTube video about low-paying newly created jobs, it concluded that recovery could be lengthy and gradual.
Summary
In summary, the original article took a closer look at U.S. employment and argued that the official unemployment rate of 5.9% captured only part of the situation. It regarded a labor participation rate of 62.7% at a 36-year low as especially meaningful. It also contrasted civilian labor-force growth of one million over six years with civilian-population growth of 14 million, offering that as an explanation for the then-current employment-to-population ratio of 59%. The article anticipated that labor-market structural weakness would continue restraining U.S. economic growth.
