The U.S. labor market continued to struggle in September as 95,000 jobs were lost, according to the Bureau of Labor Statistics. The unemployment rate remained at 9.6% during the month. The private sector grew modestly by 64,000, as most of the losses came from federal and local governments. What is likely one of the most consequential jobs reports in years only acts to further enhance uncertainty about the economy. It doesn't show a clear step back, just an inability for the job market to take a firm step forward.
If economists' expectations are any indication, then this report was disappointing. They predicted total jobs would decline by just 8,000, far less than the 95,000 total losses. Analysts also thought private sector jobs would do a little better, adding 85,000 instead of just 64,000. They did, however, expect the rate to increase to 9.7%, though it remained constant at 9.6%.
The report shows that the labor market recovery can't seem to get its footing, but this isn't really news. All year significant job growth has been a struggle. So it's hard to know how much this data will add to voters concerns at midterm elections in a few weeks. It's also unclear if the Federal Reserve will see it as strong enough evidence that it must loosen monetary policy in early November. The narrative of an anemic recovery hasn't really changed, it was just reinforced by today's report.
Let's dig a little deeper into the numbers. First, here's a chart showing the unemployment rate back two years:
As you can see, it's been 9.4% or higher for 17 months now. Here's another chart showing jobs added/lost each month over this period:
That nice trend that had been forming last spring appears to have completely disappeared, with jobs lost for the last four months straight. Losses were also a little worse in September than in July or August. But there's some distortion here due to temporary Census jobs which increased in the spring and were gradually eliminated through September, with the final 77,000 layoffs last month. So looking just at the private sector also provides a useful picture:
Unfortunately, this isn't a great story either. Again, there was a good trend forming in the spring, but over the last three months the private sector has been slowing its hiring.
In fact, most major private industries added jobs in September, as this breakdown shows:
You can see that government jobs really hurt the overall jobs number this month, as state and local government added significantly to layoffs with 83,000. On the private side, construction continued to struggle as 21,000 more jobs were lost. Meanwhile, leisure & hospitality, and health care were standout industries that saw decent job growth in September.
It might look like good news that the number of long-term unemployed Americans continues to edge down:
Unfortunately, there's some reason to believe that many of those who were unemployed for an extended period are simply leaving the workforce instead of finding jobs. Discouraged workers rose to the highest level we've seen since the recession began in September:
Moreover, U-6, the broadest measure of unemployment which includes people who are discouraged, marginally attached to the workforce, or forced to work part-time because no full-time work is available, increased to the highest level we've seen since April at 17.1%.
So how did the unemployment rate manage to stay constant at 9.6%? Up to now, we've been talking about seasonally adjusted data. If you look at the unadjusted rate, it declined to 9.2% -- the lowest the unadjusted rate has been since May 2009. But as just mentioned, this appears to be more due to Americans exiting the workforce than finding jobs. Here's a chart showing the difference between seasonally adjusted and unadjusted unemployment:
Today's report doesn't provide any good news for Democrats fighting for their seat in November's midterm elections. The story they likely hoped to be telling when campaigning was one of a strong recovery, restoring jobs to America. After two years in office, however, the unemployment rate swelled above 10%, and hasn't declined much since. With no fiscal stimulus likely on the horizon, we'll have to now wait until November to see if the Federal Reserve decides to try more quantitative easing to get firms spending and hiring. Ultimately, however, only time can help to heal the U.S. economy. Until Americans and their businesses begin to feel more optimistic about their prospects, job creation will continue to struggle.
Finally, our readers did decently well in our monthly poll on the headline numbers. An impressive 45.4% accurately predicted that there would be between 0 and 100,000 jobs lost in September. But just 17.3% guessed that the unemployment rate would remain steady at 9.5%. To anyone who got both: well done.
Correction: In the jobs added/lost per sector chart, it incorrectly stated 17,000 jobs added for education. This was actually the number for education plus health care. The report indicated that 15,100 education jobs were lost, as now shown by the chart.
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