The Employment Situation for September – Weak Payrolls and Noisy Unemployment Rate

The Employment Situation report for September released by the Bureau of Labor Statistics (BLS) today surprised analysts with a 0.3 percentage point decline in the unemployment rate, from 8.1% in August to 7.8% in September. Unlike last month when the decline in the unemployment rate from 8.3% to 8.1% was attributable to a shrinking labor force, the September decline was based on a surge in the number of persons employed, a gain of 873,000, according to the household survey. This is a large gain, even for this survey, which tends to have bigger swings than the establishment survey.

In contrast, the establishment survey reported a much more subdued net gain of 114,000 in nonfarm payroll employment in September. The private sector added 104,000 jobs while the government sector added 10,000 jobs. Large upward revisions, mainly in local education, account for the bulk of the upward revision of 86,000 for July and August. This brings the average monthly pace of payroll gains to 146,000 for the year so far. Ordinarily monthly job growth of 200,000 is required to keep up with growth in the labor force and keep the unemployment rate from rising.

The divergence between the establishment and household surveys, in this case weak payroll growth and a declining unemployment rate, is not new. The establishment survey has a larger sample and movements in the household survey tend to be more volatile. This combined with the swings in the size of the labor force since the end of the recession point to the subpar growth in payrolls as a better indicator of current labor market conditions than the recent declines in the unemployment rate.

 



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  1. An increase in the number of part-time workers may reduce the reported unemployment rate by 3/10 of one percent but the facts are that (1) there are less workers in the workforce now than four years ago and (2) the great number of workers who have given up looking for employment and are no longer counted, make this statistic almost meaningless. Add to this the drastic decrease in family income and the fact that approximately 23 million Americans are now unemployed or under-employed, including one-half of all recent college graduates, and you can see why the GDP is anemic. Americans have less wages and no home equity to spend and part-time jobs are not going to fix it..

  2. It should also be noted that a significant number of the jobs added were part-time positions which simply adds to the number of Americans underemployed,

  3. Where do you get your info that there are less people in the workforce now than four years ago?

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