Jobs Report Down First Time In Seven Years, But Its Not As Dire As it Looks

The United States economy took quite a hit this month as, for the first time in seven years, employment is down. It is quite a peculiar statistic, especially when you consider that unemployment has fallen to a 16-year low and wages are up.

Indeed, employers lost about 33,000 jobs last month, which is the first September decline since 2010. If you recall, that was when the US economy was still trying to recover from the most recent recession. But while this was happening, the US economy somehow managed to simultaneously reduce unemployment from 4.4 percent to 4.2 percent. That is the lowest rate since February of 2001.

With all that in mind, then, economists and Federal Reserve officials alike are probably going to write the drop off as the Fed looks to raise interest rates later this year on the heels of an improving economy.

Joel Naroff (of Naroff Economic Advisors) notes, “Despite the decline [in job gains], it’s really clear that the labor market remains in good shape.”

But just how “good” is it?

Well, average hourly wages are up 12 cents, now at $26.55. This has contributed to better annual gains, which are up from 2.5 percent to 2.9 percent.

It is important to remember, though, that these mixed numbers might hide different trends. This means, then, that the jobs market is likely not quite as bad as it looks.

S&P Global Ratings US chief economist, Beth Ann Bovino, notes, “You had a pretty nice pickup of people entering the jobs market and people getting jobs. That’s a really good combination. That to me is reason to believe that this jobs market is a lot more upbeat than 33,000 lost jobs in that establishment employment report.”

For example, a US households survey showed that employment actually grew by 906,000 last month (which is why the jobless rate is looking so good right now). It is important to examine that the household survey is just an estimate of employed Americans and not, necessarily, representative of total jobs. This does not cover Americans who are, for example, self-employed.

With that, University of Michigan economist Justin Wolfers comments, “I know the household survey is noisy, but even if you only put a little weight on a huge number, the big number is still good news.” Obviously, he comments, it is likely we have never seen such a large divergence (from 33,000 to 906,000).