US Employment report September 2014
The decline to 5.9% in the U.S. unemployment rate pushes it down to its lowest level since July 2008. The latest report is a sigh of relief for investors who recently had become concerned over the ability of the world’s largest economy to maintain its momentum through year-end.
However, the report fails to deliver a clear blue sky view of the labor market with little change in stubborn measures of underutilized employees working less than they would prefer. Average hourly earnings were also static, paring an annual change to 2.0%, despite a tick-up in the average workweek to 34.6 hours. The manufacturing workweek at 40.9 hours was unchanged in September while the sector managed only to reverse a 4,000 job loss for August. Note the ADP reading earlier in the week delivered a jump of 30,000 manufacturing workers. The government reading is more in-keeping with the decline in the employment index delivered this week by the ISM.
The report carried with it a net two-month revision of 69,000 jobs, notably boosted by a massage higher to 180,000 for the August report. Its initial reading of 142,000 was the first warning sign that the economy was perhaps losing momentum in the face of growing geopolitical threats. The three-month average pace of job gains through the end of the third-quarter now stands at 223,000. For the past year, employees have added 213,000 positions per month on average. On the flip-side is the dip in the participation rate by one-tenth to 62.7.
Employment gains were centered on professional and business services (+81,000), retail (+35,000), and health care (+23,000). The Bureau of Labor Statistics (BLS) noted that the 20,000 addition of food and beverage workers reflected the return to work of employees following a New England labor disruption. Taken together, these three sectors added 139,000 jobs and contributed to 56% of the September tally of 248,000. In each case, the monthly tally was in excess of the average 12-month gain. In summary the September report was encouraging yet still leaves challenges for the Fed in justifying a rising interest rates given the structural problems still facing the labor market.
Chart – 56% of September jobs came from retail, professional and healthcare positions