September jobs report: lower than expected

Friday’s release of the September Jobs Report  dulled the already whetted appetite of most economists, and observers that the U.S. boon cycle would continue along a straightforward path, with the economy adding 185,000 jobs, yet it delivered merely 134,000 jobs.

Most attributed the decrease to Hurricane Florence that devastated the Carolina's, and the tourism and hospitality that also showed a corresponding loss. Most analysts expect this figure to be revised, as was August, month traditionally has revisions according to summer and seasonal employment.

ADP had predicted that there would be a surge  in non farm employment of 230,000 jobs, and this report is seen by many as a precursor to the government report issued at the end of each month by the Bureau of Labor and Statistics, that gives, what we refer to as the marquee number for unemployment, and also the overall picture of unemployment in the United States.

Mark Zandi, chief economist of Moody’s Analytics, said “that at the current pace of job creation, unemployment will fall into the low 3 percent’s by this time next year,” reported The Hill.

The upward revisions for July and August, encouraged some to ignore September, since there were 87,000 more jobs in July and August than initially reported, and chief among them was “Jason Furman, the former head of the Council of Economic Advisers in the Obama administration, [who] said the drop in unemployment along with upward revisions in jobs growth in July and August is "enough to make you ignore the 134K headline jobs number" and "you would be mostly right in doing that," he wrote on Twitter.

Even so, there was concern by many others who saw that the revision, still pushing the U.S. economy, nearly to full employment, was showing signs of heating up, and to that end, caution must be exercised as the Federal Reserve has scheduled interest rate hikes to counter any sign of inflation - one of the their mandates.

With the 3.7 unemployment figure, it gave President Trump, once again, the right to proclaim that the victory was his, all his, and once again he broke a “federal rule that says federal workers should not comment on the jobs report until an hour after it has been released. Previous White Houses have typically followed the rule but none used Twitter like Trump,” also reported the Hill.

Each president, of course, likes to tout lowered unemployment, as their own, but most recently, the rising figures have been shown to be a direct effort on the part of former Fed Chair, Janet Yellen; who along with President Obama, whose efforts made possible legislative efforts that helped spur growth in employment.

Consequently, the Hill got it right when it reported, “The economy has added jobs for 96 straight months, beginning in October 2010 under President Obama. It is the longest streak of monthly jobs growth on record.”

Partisanship is taking full credit, and Sen. John Thune (R-S.D.), chairman of the Senate Republican Conference, touted the falling unemployment rate and that his party's actions are improving Americans' lives through economic growth.

“Our economy keeps getting better," Thune said, and added, "As a result of the positive reforms the Republican-led Congress implemented to grow our economy, more Americans are getting back to work.”

"The labor market is in excellent shape heading into the end of 2018, perhaps the best it has been in 50 years," proclaimed Gus Faucher, chief economist for PNC.

Tempering that optimism are wages, which have still not risen, despite the gain from August of 2.8 percent; which while increasing the overall yearly rise, was still lower than  the prior month.

Some, such as Shawn Sebastian and Marshall Steinbaum of FedUp, have felt that the Fed should not raise rates, until wages are up, and attribute decreased wages to monopoly employers, specifically those that are few in number, but that hire most of the workforce.

In an interview with CNBC at the annual meeting of central bank economists in Jackson Hole, Wy., they also said that antitrust actions might come into play to increase wages, and the slow demise of unions is also responsible, along with market concentration.

Offering another perspective, in her interview with The New York Times, “Amy Glaser, senior vice president of Adecco Staffing, said that employers she worked with were raising wages and reaching into less-common pools of potential employees like retirees, stay-at-home moms and people with disabilities.

Ms. Glaser said she expected wages to rise further, saying some of her clients were thinking about increasing hourly wages as much as 20 to 40 percent during the peak holiday season and early next year. Employers are also pushing to retain the workers they have — for example, by offering more bonuses for e-commerce and other seasonal workers who stay through the holidays.”

Taking a broader, more global look, The Economist has described the slump in wages, tied to inflation that is nibbling away at wages. They said, in June, that "inflation is eating up pay increases and that real—that is, inflation-adjusted—wages are therefore stagnant. Real wages in America and the euro zone, for example, are growing more slowly even as the world economy, and headline pay, have both picked up.”

Notably, the August wage increase was not enough to increase consumer spending, which drives the overall American economy.

A significant bright spot, continuing from August, is the increase in hiring for job seekers with only a secondary education. And some employers are even decreasing requirements, overlooking lesser marijuana convictions, and even giving employees greater control over their schedule, as a further hiring incentive.

In that regard, with e-commerce shipments growing by seemingly light years, there is a correspondent, and urgent need for truckers.

On another track, is House Minority Leader Nancy Pelosi (D-Calif.) who said that "beneath the September jobs numbers, middle-class families across America are struggling to keep their heads above the rising costs of health care, prescription drugs and everyday living expenses."

Joining her, in this, assessment is Marc Morial, president and CEO of the National Urban League who stated on CNBC that while “Low unemployment is a good thing, but many still don’t have enough in their pocket books to pay the bills.”

He also cited the specter of rising inflation, and a decreased housing market as subsidiary factors in reading the September report.

It’s been a given that black unemployment decreases further than whites, and the old adage is when white America sneezes, black America catches a cold.

In December of 2016, it was noted by many that Illinois - held the nation’s highest black unemployment, in the nation, at 15 percent, according to the Economic Policy Institute,

That was preceded by another report in 2015, showing that “nationally, African Americans had the highest unemployment rate in June, at 8.6 percent, followed by Latinos (5.8 percent), whites (4.4 percent), and Asians (3.5 percent).”

September has showed a welcome change, and the decrease over the last few months and highlighted in September showed a decrease in unemployment, by three-tenths of a point, to a 6 percent rate; but as Morial stated, there is still a long way to go, and the issues that Pelosi points out are bread and butter issues, that will not disappear without hard effort on the part of lawmakers.

That aside, there are others who are optimistic, stating  “that the labor market was still pushing ahead — no matter how unevenly — in what is now the ninth year of an economic expansion. “The other data we’ve been seeing this week don’t show any signs of a weaker trend,” Jim O’Sullivan, chief United States economist at High Frequency Economics said, “If you take out Texas and Florida, there’s been no increase in jobless claims over the past five weeks.”

Market reaction was mildly negative, said the Times, and there has been no visible effect on the economy -- at least not yet -- by the increase in tariffs, which Trump had at $50 billion, but now has increased to $53.2 billion. Yet, some economists believe that ultimately the American consumer will be hit with higher costs for consumer goods, thus wiping out job gains, no matter how hard wrought, or on whose watch.

Taking the report on the whole, for most, seems, due to Florence, a blip on the market, yet there are those who take it even stronger, and one is Zandi, who in an interview with CNBC, said: “This labor market is rip-roaring hot, and it is just going to get a lot hotter. The risk that this economy overheats is very high and this is just one more piece of evidence of that.”

It can be argued with the issue of housing, healthcare, and even regional differences, that some might want him to switch to decaf, yet the threat of an overheated market is one that the Fed will be watching very carefully.

Updated 16 October 2018