The U.S. Labor Department released a delayed report on the country’s jobs market Tuesday, showing the stumbling nature of employment growth. Some key points:
What it says
As The Globe and Mail’s Kevin Carmichael reports, the U.S. economy churned out just 148,000 jobs in September, below what economists had projected. At the same time, the government revised its August numbers to show a gain of 193,000 jobs, better than the 169,000 in the original estimate. Having said that, the July showing was revised down.
The unemployment rate dipped to 7.2 per cent in September from 7.3 per cent in August. But the wider jobless measure, which takes into account those who have stopped looking for work and people in part-time positions but would prefer full-time work, stood at 13.6 per cent.
The participation rate held at a 35-year low of 63.2 per cent.
The private sector accounted for the bulk of the jobs, at 126,000, with the public sector representing just 22,000.
What it shows
Senior economist James Marple of Toronto-Dominion Bank: “At an annualized rate of 1.3 per cent, the pace of job growth is consistent with an economy growing at just 2 per cent. Until economic growth shows signs of accelerating, job growth will remain in this range. Signs that the American economy is ready to escape this slow-growth rate have been building, but acceleration is dependent on diminishing fiscal drag.”
Did the shutdown play a role?
The report is for September, while the shutdown began in October. Still, economists suggest, the angst in the run-up to the partial shutdown of the U.S. government would have hurt confidence.
Assistance chief economist Dawn Desjardins of Royal Bank of Canada: “The government shutdown likely tempered spending activity in October with the University of Michigan’s consumer sentiment index for early October, falling to its lowest level since January 2013. The hit from this disruption is likely to be short-lived given a gradually improving labour market, strengthening in equity markets and decline in interest rates.”
What does it mean for Fed policy
What investors want to know, of course, is where the Federal Reserve may be headed in terms of the timeline for cutting its monthly asset purchases from their current $85-billion (U.S.) a month under a stimulus program known as quantitative easing, or QE, given its focus on easing unemployment.
The central bank had been widely expected to begin this so-called tapering in September, but surprised markets by holding off. Thus the focus shifts to next week’s meeting of the Federal Open Market Committee, and observers believe it will stand pat again. In fact, it will do so for some time.
Brian Jones of Société Générale: “For a third straight month, nonfarm payroll gains fell short of both our and the median Street expectations. The pronounced slowdown to just 143,000 per month over the July-September span has removed virtually any chance of tapering asset purchases at the FOMC’s December meeting. Given the choice between the January and March meeting next year, the latter definitely looks more likely at the moment.”