Jobs re­port leaves lots of room for ‘spin’

Daily Local News (West Chester, PA) - - BUSINESS - Joel Naroff Colum­nist

IN­DI­CA­TOR: >> Septem­ber Em­ploy­ment Re­port KEY DATA: >> Pay­rolls: 156,000; Pri­vate: 167,000; Un­em­ploy­ment Rate: 5 per­cent (up 0.1 per­cent­age point) IN A NUT­SHELL: >> “A lack of qual­i­fied ap­pli­cants is lim­it­ing hir­ing while grow­ing job open­ings are bring­ing peo­ple back into the mar­ket, all signs of a la­bor mar­ket near full em­ploy­ment” WHAT IT MEANS: >> If Fed mem­bers were hop­ing for a strong Septem­ber jobs num­ber, they didn’t get it. Yet the em­ploy­ment re­port nei­ther put the ki­bosh on a De­cem­ber rate hike nor pro­vided cover for one. Pay­rolls in­creased a lit­tle less than ex­pected, but the pri­vate sec­tor hired peo­ple at a solid pace. It was the govern­ment that re­strained job growth. Re­mem­ber, a job is a job, no mat­ter who does the hir­ing. As for the de­tails, man­u­fac­tur­ers con­tinue to slice pay­rolls.

De­spite near record sales, the ve­hi­cle sec­tor down­sized. There was also the usual odd­ity. This time it was a huge 14,000-worker re­duc­tion in the tran­sit and ground trans­porta­tion sec­tor. Did some­one go out of busi­ness while I was not look­ing? Back that out and the num­ber comes in right at ex­pec­ta­tions. In­deed, there were few other sur­prises as just about ev­ery other sec­tor added work­ers at a rea­son­able pace. Hir­ing may not have boomed but wages and hours worked were

up solidly, im­ply­ing that per­sonal in­come was up strongly.

As for the tick up in the un­em­ploy­ment rate, it was more a round­ing is­sue than an in­crease. The rate was 4.92 per­cent in Au­gust and 4.96 per­cent in Septem­ber. That is well within the mar­gin of er­ror. But more im­por­tantly, there was a large rise in the la­bor force, which led to an in­crease in the par­tic­i­pa­tion rate. That is ex­pected at this point in the cy­cle. In­deed, I com­mented yes­ter­day that a tick up in the rate shouldn’t be a sur­prise if

the la­bor force surged.

The so-called “real” un­em­ploy­ment rate, the U-6, stayed at 9.7 per­cent. But let me say once again, this is mean­ing­less num­ber. It in­cludes peo­ple who want full-time jobs but can only get part-time jobs. The prob­lem is that busi­nesses have shifted hir­ing strate­gies and now pre­fer more part-timers than in the past. Peo­ple might want to work full­time, but if busi­nesses don’t want full-timers, there is noth­ing work­ers can do. This is a struc­tural shift and com­par­ing to­day’s U-6 rate with those of the past is point­less. It is not the econ­omy that has caused the rate to be high, but busi­ness hir­ing de­ci­sions. So, ei­ther blame busi­nesses for profit max­i­miz­ing by hir­ing more part-timers or dump the num­ber. I say just dump the num­ber. MAR­KETS AND FED POL­ICY IM­PLI­CA­TIONS: >> I am sure this re­port will be spun

in so many ways that we will all be dizzy by day’s end. My take is sim­ple: The lack of avail­able work­ers is lim­it­ing the abil­ity of firms to hire. It is not that they don’t want to, it is that they can­not find qual­i­fied work­ers at wages they are will­ing to pay. Thus, mod­er­ate job gains are likely to per­sist and are not a sign of eco­nomic weak­ness but are a sign of a tight la­bor mar­ket. Ex­pect to see the un­em­ploy­ment rate bounce around, but slowly de­cline.

This is also a nor­mal pat­tern. Most econ­o­mists thought this would hap­pen a year or even two years ago, but that pat­tern was de­layed. When job open­ings are high and the amount of “ex­cess”

or read­ily avail­able la­bor is low, peo­ple who have given up come back into the mar­ket. That is hap­pen­ing now and is slow­ing the de­cline in the un­em­ploy­ment rate. As for the Fed, this re­port nei­ther screams “hike” nor forces the FOMC to punt again. With the mem­bers lean­ing to­ward a hike this year, even medi­ocre re­ports like this one are still good enough to al­low for a rate hike in De­cem­ber. That is what I ex­pect.


United Auto Work­ers as­sem­ble a 2017 Ford F-Se­ries Su­per Duty truck at the Ken­tucky Truck Plant in Louisville, Ky., on Sept. 30. U.S. em­ploy­ers added a de­cent 156,000 jobs in Septem­ber, even while an in­flux of job seek­ers lifted the un­em­ploy­ment rate slightly to 5 per­cent.

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