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September Jobs Report: What to Watch For U.S. Added 136,000 Jobs in September; Unemployment Rate at 3.5%
(about 2 hours later)
The Labor Department will release the latest hiring and unemployment figures for September at 8:30 a.m. Eastern time. The monthly report provides one of the better snapshots of the state of the American economy. Here’s what to watch for: ■ 136,000 jobs were added last month, the government reported on Friday. Analysts surveyed by MarketWatch had expected a gain of about 147,000.
Wall Street analysts expect the report to show that job creation picked up last month, with employers creating 147,000 jobs. The Bureau of Labor Statistics initially reported that 130,000 jobs were created in August, a figure likely to be revised Friday. ■ The unemployment rate was 3.5 percent, the lowest in a half century and down from 3.7 percent the month before.
Unemployment is expected to be unchanged at 3.7 percent. ■ Average hourly earnings were little changed after growing by 0.4 percent in August. The year-over-year gain was 2.9 percent.
Average hourly earnings are expected to show a rise by 0.2 percent, after moving up 0.4 percent in August. That would bring the year-over-year increase to 3.2 percent. The cavalcade of payroll gains continued for the 108th month in September, a counterpoint to anxieties piqued by slowing global growth, declining factory orders and a jittery stock market.
The Labor Department’s monthly report has taken on added significance after a week of disappointing economic news and stock market skids. The government’s latest monthly jobs report took on added significance after a week of otherwise disappointing economic news. Manufacturing activity in the United States fell for the second month in a row, while the World Trade Organization predicted that the growth in global trade would slacken significantly. A key measure of activity in the services sector — which accounts for two-thirds of the country’s output — also cooled.
Last year, an average of 223,000 jobs were created each month, thanks in part to the temporary pick-me-up delivered by tax cuts and increased government spending. This year, the monthly average through August has been 159,000. That falloff was expected now that the recovery has passed its 10-year anniversary and there are more job postings than job seekers. The unemployment rate has remained below 4 percent for the last seven months. And many Americans who had dropped out of the labor force — because they were too discouraged to look, or couldn’t find sufficiently attractive offers — have rejoined. Still, employers kept hiring.
Job growth of less than 100,000 would set off some alarms. But unusually meager payroll gains one month can be reversed by a blockbuster increase the next. What matters is the longer-run pattern. “The private-sector service side has been robust,” said Ellen Zentner, chief United States economist at Morgan Stanley. “The labor market held up.”
“Numbers below 100,000 on a sustained basis would worry me,” said Ben Herzon, an executive director at Macroeconomic Advisers, “but numbers in the low 100,000s would not be cause for concern.” Clearly, the economy’s employment engine has lost some of its spark. Last year, an average of 223,000 jobs were created each month, thanks in part to the temporary pick-me-up delivered by tax cuts and increased government spending. This year, the monthly average through September is 161,000. The Labor Department on Friday revised up job gains by a total of 45,000 for July and August.
That falloff alone is not cause for alarm. A decline was expected now that the recovery has passed its 10-year anniversary, and there are more job postings than job seekers. The unemployment rate has remained below 4 percent for the last seven months. And many Americans who had dropped out of the labor force because they were too discouraged to look for work or couldn’t find sufficiently attractive offers have now rejoined.
“There’s been a slowing but healthy pace of job creation,” said Lydia Boussour, senior economist at Oxford Economics. “It is still keeping downward pressure on the unemployment rate.”
More worrisome, analysts say, is President Trump’s continued trade feud with China, which has roiled financial markets and pinioned business investments. He set off another retaliatory volley last month by increasing tariffs on consumer goods coming into the United States from China and threatening to extend those to even more products.
“I almost fell out of my chair” after seeing that new export orders fell recently, said Torsten Slok, chief economist at Deutsche Bank Securities. “That can only be driven by trade.”
“The economy is in a more fragile and precarious position because of downward pressure from trade war,” he added.
Mr. Trump has repeatedly placed the manufacturing sector at the center of his economic strategy. Nonetheless, that sector is suffering the most from prolonged trade tensions. Companies in the business of making goods — as opposed to those that deliver services like hospitals and restaurants — are much more dependent on sales to other countries and supply chains that wend around the globe.
The sector lost 2,000 jobs in September. Last spring, manufacturers were adding as many as 25,000 jobs a month. In recent months, the average has been a few thousand. (The United Auto Workers’ strike against General Motors began after the government completed its survey of employers, and therefore, is not reflected in September’s figures.)
But Becky Frankiewicz, president of ManpowerGroup North America, a staffing firm, is not convinced that trade friction is responsible for that drop.
“The number of manufacturing jobs we have open outpaces the number of candidates,” she said. “It’s become more difficult to fill a job in the last four months,” she added.
Banner Metals, a tool-and-die maker in Columbus, Ohio, plans to add three people to its 40-person staff next year. “Our business has not slowed down in any way,” said Bronson Jones, the chief executive and a part-owner. “We’re actually growing.”
With less than 13 million workers, the manufacturing sector accounts for about 11 percent of the country’s output, but it tends to loom larger when it comes to policy debates.
The health and education sectors remain the economy’s most potent job creators. And wage growth over all has picked up in recent months, putting more money in consumers’ pockets. As long as Americans continue to spend, the economy will keep humming.
But economic confidence can be fickle. Worries about tariffs and the general direction of the economy are spooking those outside the manufacturing sector, according to the Institute for Supply Management, which conducted the survey of service businesses.
Tom Gimbel, chief executive of LaSalle Network, a staffing firm in Chicago, said, “What I’m hearing is different from what I’m seeing.” With so much uncertainty, some chief executives say they are afraid of having too much capital invested in their business.
“But what I’m seeing is that people are still hiring,” he said. His firm’s revenue, he said, is up 15 percent from last year, and placements are up 8 percent. Workers for supply chain, technology and back-office health care jobs are particularly in demand.
The global accounting firm EY, formerly Ernst & Young, plans to hire 15,000 workers by the end of July, said Dan Black, global recruiting leader.
“There’s a lot of signals of a slowdown,” he said, “But we continue to be very bullish on hiring here.”
Mr. Trump’s trade strategy has support from some sectors that embrace his get-tough approach — even if they are suffering from the fallout. But several industries and small businesses are worried.
Adam Briggs, vice president for sales and marketing for Trans-Matic, a precision metal stamper in Holland, Mich., said the family-owned firm is feeling the strains of the tariffs and a slowing economy. “We’re struggling, but our customers are struggling with it too.”
Last year, the company employed more than 300 people in Holland. That number is down to 275, through a combination of attrition and voluntary separations, Mr. Briggs said.
Unpredictability disquiets business managers and markets. “Anything that relates to uncertainty is not good for business and household spending, said Ms. Zentner. And trade tensions — as well as the political turmoil surrounding Mr. Trump as congressional Democrats pursue an impeachment inquiry — fuel uncertainty, she said.
Politics is something that Chris Murphy, managing director of ThoughtWorks, a global software and digital transformation consultancy, rarely talks about with clients. The one exception? “The uncertainty created across industries by the trade war in China,” he said. “People are keen to see it resolved and go away sooner rather than later.”
The September reading from the Labor Department is the last monthly report to be released before Federal Reserve officials meet on Oct. 29 and 30.The September reading from the Labor Department is the last monthly report to be released before Federal Reserve officials meet on Oct. 29 and 30.
Because policymakers have split on the need for another rate cut, the employment report could be more pivotal in the decision than usual. Jerome H. Powell, the Fed chair, has noted that the labor market and consumer spending are the two of the strongest parts of the economy. Because Fed officials have split on the need for another rate cut, the employment report could be more pivotal in the decision than usual. Jerome H. Powell, the Fed chair, has noted that the labor market and consumer spending are the two strongest parts of the economy.
On Wall Street, expectations that the central bank would pare borrowing costs for a third time this month has been building this week as news about slowing growth rolled in. A weak report would encourage policymakers who favor lowering benchmark interest rates again. On Wall Street, expectations that the central bank would pare borrowing costs for a third time this month have been building this week as news about slowing growth rolled in.
The United Auto Workers’ strike against General Motors has shut down 34 factories in the United States for more than two weeks. But the walkout by 49,000 workers will not be reflected in the government’s monthly report because the strike started after the government surveyed employers.
In August, the job totals were elevated by the hiring of 25,000 temporary census workers. Mr. Herzon estimates that Census Bureau hires in September were half that number. And those gains will be reversed after a few months.
President Trump has repeatedly placed the manufacturing sector at the center of his economic strategy. Nonetheless, that sector is suffering the most from prolonged trade tensions. Companies in the business of making goods — as opposed to those that deliver services, like hospitals and restaurants — are much more dependent on sales to other countries and supply chains that wend around the globe.
Last spring, manufacturers were adding as many as 25,000 jobs a month. In recent months, the average had been closer to 3,000.
News this week that manufacturing activity in the United States fell for the second month in a row set off a stock-market tumble.
With 11.6 million workers, the sector accounts for about 11 percent of the country’s output, but it tends to loom larger in policy debates. Carl Tannenbaum, chief economist at Northern Trust, noted that a key measure of manufacturing activity reflected in a survey by the Institute for Supply Management “has a better track record of being a leading indicator of downturns, so I do think there is something to the hold that it has on confidence.”
A decline in manufacturing hires is likely to fuel anxieties about the economy.
Mr. Powell’s pride in the labor market’s performance is well grounded. The jobless rate has skimmed along near half-century lows. Sidelined workers have been lured from living rooms and classrooms back into the workplace. New applications for unemployment insurance have not risen noticeably in recent months.
“One of the best stories about labor market in the last two years is that the job market has done so well, it is now reaching into further corners and providing opportunities to those who had not enjoyed them,” Mr. Tannenbaum said. “This is the way the economy is supposed to work.”
The tight labor market as well as minimum wage increases in several states and cities have helped bulk up paychecks for workers at the lowest end of the salary spectrum. And it means that when some workers, say, in retail lose a job, they have an easier time finding another.
The most highly sought after workers, though, are often the most highly skilled and the most highly paid — a phenomenon that tends to exacerbate income inequality. So keep an eye on not just the total number of payroll gains, but also on what kinds of jobs are being created.
Keep an eye on whether restaurateurs are hiring. A drop in leisure and hospitality job gains could indicate that consumers are not feeling as free to spend.
“Dining out is the single most highly discretionary category,” said Ellen Zentner, chief United States economist for Morgan Stanley. “It responds in kneejerk fashion when people are uncertain about job security and income.”