Economists Can't Find the Silver Lining in Today's Jobs Report

Friday's job figures contain few positives

Deep Dive Into the U.S. Payroll Numbers

When the U.S. jobs report is released each month, there's typically enough nuance to offer something for everyone — the good and the bad. Today proved to be a feast for the bears.

"When you look through all the details of the data, there just isn't anything good to hang your hat on," said Thomas Simons, a money-market economist at Jefferies LLC in New York. "It's been years since we've seen such an unambiguously bad report."

Silver linings were tough to come by in the September jobs data. Payrolls came in at a much-weaker-than-forecast 142,000, while August and July figures were revised down. Wage growth was nonexistent for the month, with average hourly earnings actually falling by a penny on average.

The softness in manufacturing endured, with factory payrolls falling by 9,000 when they were expected to show no change. With dollar appreciation and sluggish overseas growth providing headwinds, it was the biggest back-to-back decline since 2010.

Even service industries, which make up the lion's share of the economy and are more shielded from global weakness, seem to have shifted into a lower gear. Payroll growth there has slowed for four straight months, the longest such streak since 2001.

"While it's always important not to overreact to one single data release, we'll make an exception in this case," Paul Ashworth, chief U.S. economist at Capital Economics NA Ltd. in Toronto, wrote in a note to clients. "Aside from manufacturing, the slowdown in employment gains is most notable in business services and education and health, which are not the sectors most prone to cyclical swings."

Even a small positive in today's report — a sharp decline in the ranks of the underemployed — must be taken with a grain of salt, economists said. The ranks of people working part-time for economic reasons fell by the most since January 2014, which is generally a good sign. However, the number of full-time employees dropped as well. Meanwhile the labor force participation rate decreased to the lowest level since October 1977. At best, the data are murky.

"It's weak through and through," Simons said. Because such thoroughly disappointing reports are so rare, "we probably won't see it again next time around."

It'll be important to see if other labor-market data corroborate Friday's figures. Measures tracking jobless claims, job openings and households' perceptions of the labor market remain solid, suggesting the payroll figure may just represent a soft patch in the data, said Kevin Cummins, a senior U.S. economist at RBS Securities Inc. in Stamford, Connecticut.

"The other data we look at on the labor market hasn't shown any sort of cracks," he said. "We are not too concerned about the overall economy markedly slowing here, but we think there's a possibility that some of the global concerns the Fed is worried about is perhaps spilling over into the labor market."

The Federal Reserve delayed raising interest rates last month amid concern that international risks could jeopardize U.S. growth. Many economists said a rate hike at the Fed's next meeting in October is likely now off the table, and the bond market pushed back expectations until at least March.

"I didn't see anything too redeeming, but we always have to be careful not to get too wound up over one number," said Kathy Bostjancic, an economist at Oxford Economics USA Inc. in New York ,who still sees the central bank raising rates in December.  

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