The job market received a big boost this morning when the U.S. Labor Department reported that the nation added 114,000 payrolls in September. Although that addition was just in line with expectations, the job creation numbers were revised notably higher for July and August. Specifically, the initial estimates for payroll growth in July had been 141,000; that estimate was adjusted to show a gain of 181,000. In August, the initial job creation tally was 96,000. That increase was revised upward to 142,000 positions. Coupled with the September gain of 114,000 jobs, the monthly average for the past quarter was 146,000. That compares with the prior quarter when the monthly average had been just 67,000.
Moreover, in an even more stunning boost for the job market, the unemployment rate fell below 8%, tumbling from August's level of 8.1% to 7.8% in September. That number represented a 44-month low. And, in a further dose of good news, the latest drop in the jobless rate was not the result of an increase in the number of Americans leaving the job market. That had heretofore been the case when the unemployment rate had fallen. This time, though, there were fewer discouraged workers in the survey. Those unemployed had typically been leaving the labor force, at least temporarily. Now, they are increasingly looking for work--at least in this latest snapshot of the job market.
All told, the average monthly increase in employment this year stands at 143,000. While that is still some 50,000 a month below a level we sense is needed to sustainably bring down the unemployment rate, it is a healthier pace of growth than during the spring and, therefore, could possibly be the start of a somewhat better upturn in job creation. Overall, however, we still think that it will be another six to 12 months before we get much more vigorous job growth.
In addition to the actual payroll growth and the lower jobless rate, the report also noted that the average work week had edged upward by 0.1 hour to 34.5 hours last month. The manufacturing workweek also pushed higher by 0.1 hour, to 40.6 hours. Also in September, average hourly earnings for all employees on private non-farm payrolls increased by seven cents an hour to $23.58 an hour. Over the past 12 months, average hourly earnings have risen by 1.8%--which is reasonable given the low inflation rate, but not an example of eye-catching strength.
Taken as a whole, the report was constructive, but probably not a game changer as far as the economic expansion is concerned, as we still would expect very modest, but sustainable, GDP growth of 1.5%-2.0% over the next four to six quarters.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.