(TNS)—September hiring fell well short of consensus expectations and previous economic growth was less robust than thought, new Labor Department statistics say in a dismal monthly report that painted a picture of an economy in downshift mode.
Employers added a disappointing 142,000 jobs in September, the Labor Department says Friday, and added just 136,000 jobs in August, a revision of an earlier estimate of 173,000.
The unemployment rate held steady at 5.1 percent, but wage growth was flat for the month, meaning workers weren’t taking home more.
“The job report was unambiguously soft,” says Mark Zandi, chief economist for forecaster Moody’s Analytics. “Not only was the monthly job gain light, but there were surprising downward revisions to gains in previous months. Hours worked also fell, labor force participation declined, and wage growth stagnated.”
In comments to the media, President Barack Obama says a slowing global economy is creating headwinds, and he called on Congress to pass a budget that eases up on austerity to stimulate more economic growth.
Here are three important takeaways from the dismal jobs report.
Several important sectors fell back sharply in September, suggesting that the global economic slowdown is spilling over into the U.S. economy. At minimum, the global turmoil is “causing businesses to turn more cautious in their hiring,” says Zandi.
The financial sector, which holds an important place in the economy, was flat. The construction sector, in the final months before the winter slowdown, added a lackluster 8,000 jobs. And the labor-intensive manufacturing sector, socked on the chin by the strong U.S. dollar, shed 9,000 posts in September. A stronger dollar makes U.S. goods more expensive abroad.
“Since January … the manufacturing sector has netted zero net new jobs, with 27,000 workers lost in just the past two months,” notes Chad Moutray, chief economist for the National Association of Manufacturers. “In the second half of 2014, manufacturers were hiring at the more-robust pace of 20,667 workers per month on average, illustrating a significant pullback” in hiring.
Servicers, Health Care Still Bright Spots
Hiring in the services sector remained relatively strong while other sectors buckled in September. The professional and business services sector, often better-paying white-collar jobs, added 31,000 posts last month. The health care sector, continuing a strong win streak, added almost 35,000 jobs.
The weak hiring stands in contrast to the solid readings of consumer sentiment and recent sales of automobiles. When sentiment is strong, it’s reflected at the mall and in stores. The retail sector added almost 24,000 jobs last month, while companies engaged in leisure and hospitality led all sectors with 35,000 new posts.
Interest Rate Hike Probably Off
September’s phlegmatic hiring makes almost nil the chance that the Federal Reserve will raise, later this month, its key benchmark interest rate. That fed funds rate influences the cost of borrowing for consumers and businesses across the economy, and the Fed hasn’t raised it in almost a decade.
“This likely rules out an increase in the fed funds rate when the (Fed) next meets in late October, and a mid-December rate increase now looks less likely,” says Gus Faucher, senior economist at PNC Financial Services in Pittsburgh. “Financial markets are now pricing in the first increase in the funds rate in March (2016).”
Over the past three months, average job gains were 167,000, and an average through August of 198,000. Job growth has slowed and that should change the risk calculation for politicians engaged in the ritual of threatening a government shutdown or temporarily defaulting on government debt.
Congress recently passed a measure to keep government funded just through Dec. 11, and the Treasury Department says Thursday that on Nov. 5 it will run out of extraordinary measures it has been using to pay bills and keep under a debt ceiling. After that point the government might have to selectively default on some debt, a move sure to send financial markets into panic mode.
“This is not the way the United States should be operating,” Obama says Friday, urging Congress to avoid another “manufactured crisis” that hits hiring and consumer sentiment.
Either event would amount to a self-inflicted wound in a period of clear weakness.
“A jobs market that has lost steam will likely make politicians in Washington less prone to do anything that could hurt the economy further, including a government shutdown or brinksmanship on raising the debt ceiling,” Nariman Behravesh, chief economist for forecaster IHS Global Insight, told McClatchy.
September by the Numbers
- Professional and business services, up 31,000
- Manufacturing, down 9,000
- Leisure and hospitality, up 35,000
- Health care, up 34,400
- Construction, up 8,000
- Temporary help services, up 4,600
- Transportation and warehousing, up 3,500
- Retail, up 23,700
- Financial services, flat
- Government jobs, up 24,000
©2015 McClatchy Washington Bureau
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