Friday, October 5, 2012
The Presidential race just ended: Unemployment drops to 7.8%
- by New Deal democrat
You may stop wringing your hands about the debate Wednesday night. The BLS just reported that in September the unemployment rate dropped to 7.8%. 114,000 jobs were added. President Obama was just re-elected.
We'll have more shortly and will update this post.
Update 1: The internals aren't totally rosy, but there is some welcome relief here compared with the last few months.
- In addition to adding jobs in September, both July and August payrolls were revised upward, July by 40,000 to 181,000 and August by 46,000 to 142,000. Upward revisions happen in expansions, not recessions.
- Aggregate hours increased by 0.4%. This is a broader measure than the number of jobs and confirms the expansion.
- Average hourly earnings increased by about 0.3%. They are up 1.8% YoY. Depending on how gas prices impact September's inflation report, this might be the first time in over a year that YoY real wages have increased.
- The manufacturing workweek increased by 0.1. This is an element of the LEI. Overtime was flat.
- Government added jobs this month, and as after revisions also added to payrolls in July and August as well.
The internals from the household report were even better. In addition to the drop in the unemployment rate ...
- The number of jobs added in this report rose by 873,000! This report tends to lead the establishment survey at turning points. It just negatived a recession.
- The number of persons "not in the labor force" decreased by 211,000. So the unemployment rate didn't decrease because people gave up looking.
- As a result, the employment to population ration increased by 0.4 to 58.7.
- Last but by no means least, one of the most accurate gauges of layoffs -- a better leading indicator than initial jobless claims, and an element of ECRI's unpublished Short Leading Index, is the number of those unemployed from zero to 5 weeks. It decreased by 302,000. This is totally inconsistent with entering a recession.
- the alternate U-6 unemployment rate, which includes discouraged workers, did not decline, but remained steady at 14.7%.
- the YoY% change in the number of employed persons, at +1.37%, has been holding generally steady now for almost half a year. While that's not great, the lack of a decline in this metric negatives one of the signs ECRI relied upon as proof of an oncoming recession.
There were a couple of little dark clouds:
- Manufacturing jobs decreased by -16,000. This is a leading indicator and is another confirmation that manufacturing is stalled if not contracting.
- Temporary jobs declined by 100 (yes, one hundred), while August was revised from negative to positive 1,000. Temporary jobs are also a leading indicator for employment, and they have stalled.
There are problems, but this month's report was good as to the economy. Politically, unless there is some bolt out of the blue, Barack Obama's re-election was probably just assured.
From Bonddad: a few notes in addition to NDD's points.
1.) The household survey increase is very important as this is a leading number. After a stagnant summer, we see a big jump.
2.) The upward revisions to previous months data is very positive as well, as this is something that happens in expansions rather than contractions.
3.) Expect to see a few exploding heads regarding the difference between the household and establishment survey. Of course, the fact that these are entirely different surveys may have a little to do with that. See here and here for more detail.
The question for the slow summer is, why? I think the primary answer is the global slowdown we've seen in China and the EU, which has tempered US hiring plans and put people on hold. In the US, we have the fiscal cliff, freezing activity. I think now people have gotten to the point where they can't hold-off hiring any longer. So, rather than doing it in slow pieces, they're doing it all at once.