Maybe he can find what's missing.

The Missing Trio in Today's Jobs Report

Mohamed A. El-Erian is a Bloomberg View columnist. He is the chief economic adviser at Allianz SE and chairman of the President’s Global Development Council, and he was chief executive and co-chief investment officer of Pimco. His books include “The Only Game in Town: Central Banks, Instability and Avoiding the Next Collapse.”
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There is a natural tendency in markets and the media to accompany every monthly set of U.S. employment data with its own suspenseful narrative. This time around, the story line focused on whether the jobs report would endorse or refute the prior month's disappointing numbers. New job creation, at 142,000, was well below expectations and the monthly average of more than 200,000.

Whether one month's report is higher or lower than the previous one matters far less than the larger picture. It's better to assess whether the U.S. saw robust monthly job creation, healthy wage growth and an improvement in the structure of the labor market. Only when this trio of numbers materializes will the significant fall in the unemployment rate feel like, and constitute, genuine improvement for the majority of the country.

Today's report tells me we aren't there yet. While the U.S. continues to outperform most of its advanced-economy peers, its growth rate is stuck in low gear. The longer this continues, the greater the risk that the economy's potential will be dragged down.

To break the pattern and achieve what U.S. Federal Reserve Chair Janet Yellen calls "economic liftoff," the U.S. labor market needs to deliver the three elements I just mentioned (and do so simultaneously). Otherwise, the sense of economic malaise will persist, fueled by sub-potential growth, excessive under-employment, unusually stagnant earnings for much of the population, and rising inequalities of income, wealth and opportunity.

Today's September jobs report suggests that the U.S. is again creating more than 200,000 jobs a month. The addition of 248,000 jobs is accompanied by a significant upward revision to the July and August numbers. With a net add of almost 320,000 jobs, the three-month average now stands at 224,000. The unemployment rate edged down to 5.9 percent, its lowest level since July 2008.

Yet the positive news on job creation doesn't extend to wage growth. The annual increase in earnings slipped to 2 percent, below a still-modest expectation of 2.2 percent. At the same time, the labor-force participation rate fell slightly to 62.7 percent from 62.8 percent in August, a multi-decade low.

Then there are the indicators of the structural health of the labor markets, an aspect I follow closely. Here the news isn't good. At 3 million, the number of long-term unemployed hardly budged. Youth unemployment rose somewhat to 20 percent, giving up half the gains of the prior month. And joblessness among those lacking a college education is still too high.

In sum, today's employment report points to an economy that continues to improve, yet only gradually. The U.S. has yet to emerge from its frustrating post-crisis "new normal," or what Christine Lagarde, the managing director of the International Monetary Fund, yesterday said is a "new mediocre" period. Given weakness elsewhere in the global economy, the U.S. recovery isn't likely to lift many boats unless Congress joins the Fed and adopts measures that lift consumer demand, reduce long-term debt and promote stronger economic growth.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Mohamed Aly El-Erian at melerian@bloomberg.net

To contact the editor on this story:
Paula Dwyer at pdwyer11@bloomberg.net