Headline nonfarm payrolls rose by 156,000 in September, versus an anticipated 172,000. Meanwhile, the August’s data point was revised to 167,000. The unemployment rate increased to 5.0%, while the participation rate also rose to 62.9%. There was a fall of 207,000 in the group classified as “not in the labour-force,” following an increase of 58,000 in August. The U6 unemployment rate (an expanded measure of unemployment that takes into account marginally attached and part-time workers) was unchanged at 9.7% in September. The household survey showed an increase of 354,000 jobs in the month, following a rise of just 97,000 in August. Meanwhile, the adjusted household survey (the BLS’s attempt to make it more comparable to the payroll survey) pointed to a decline of 609,000 after a 128,000 fall in August and an enormous 1,269,000 in July.
Private nonfarm average hourly earnings were 0.2% higher in September (0.2% for production and nonsupervisory workers) after a 0.1% rise in August. Annually, they are now 2.6% higher (2.7% for production and nonsupervisory workers). This increase was still very much in line with the recent slow and low trend and shows continued moderate upward pricing pressure. Private aggregate weekly hours for production and nonsupervisory workers were 0.1% higher in the month, after falling by 0.5% in August; they are 1.2% higher on a year ago. The 156,000 change in September’s payrolls was largely due to professional and business services (67,000), education and health services (29,000), leisure and hospitality (29,000), construction (25,000), and retailing (22,000). There was a decline in payrolls for the manufacturing sector (11,000) and government jobs (11,000). Meanwhile, the mean duration of unemployment was again lower at 27.5 weeks, from 27.6 weeks in August.
The market sensitivity around this report was always going to be much lower than last month’s report, given that the Fed is unlikely to raise interest rates in November, just a few days prior to the election, which means it also gives the FOMC another two months of reports before its December 14 FOMC meeting, where the probability of an increase is now pegged at 63.6%. In general, August’s economic data was fairly disappointing across the board, though the data we’ve seen for September is encouraging and helps to suggest that August was more of an outlier, rather than the start of a more concerted economic slowdown. Today’s report helps to support this. The fact that nonfarm payroll growth is still running around these current levels (i.e., 204,000 in the last 12 months) at this point in the economic cycle is very positive. Particularly when jobs growth of only around 80,000-150,000 is needed to keep the unemployment rate heading lower. The continued large gap in the employment-to-population ratio as well as some (albeit modest) upward movement in the participation rate indicate that there is still enough slack in employment to allow the unemployment rate to move lower without sparking a major inflationary outbreak. For the Fed, however, it will do nothing to dissuade it from moving in December (as it seems desirous of doing) nor does it do anything to force its hand to move earlier.
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Richard de Chazal, CFA is a London-based macroeconomist covering the U.S. economy and financial markets.