Jobs Report – Some Good, Some So-So, Nothing Ugly - September 9, 2019

The government’s monthly jobs report always captures the attention of analysts, economists, politicians, and investors – maybe too much attention. Why is it such a headline grabber?

There are several reasons. For starters, the report tells us whether the economy is generating new jobs and new opportunities.

It offers a look at the quality of jobs being created. Plus, fast or slow employment growth can put upward or downward pressure on interest rates.

As far as the politicos go, they can tout successful policies or assign blame.

But monthly data are subject to revisions, and they can be “noisy,” i.e., uneven. We sometimes get outliers when monthly numbers are unusually strong or weak. These reside outside the trend.

Usually, they are statistical anomalies that work themselves out in subsequent months. Still, they can create unwarranted euphoria or pessimism. We’ve seen it happen before.

With that said, let’s jump into the latest numbers. Nonfarm payrolls grew by 130,000 in August (U.S BLS). Private sector growth slowed to 96,000. The unemployment rate remained at a still-low 3.7%.

While job growth slowed from July, we saw a big influx of new entrants into the labor force searching for work. This is measured by a separate survey called the Household Survey. The good news – these folks found jobs. It’s why the jobless rate held steady.

Looking at longer trends, the data signal that employment growth has slowed, likely in response to a slowdown in U.S. economic growth. We see it in the graphic below. It’s a review of the three-month average, which helps smooth out any monthly anomalies.

The good news – the economy continues to expand, it continues to generate new jobs, and it’s creating enough new jobs to keep the unemployment rate from rising.

Further, the jobs report, along with other pieces of data, isn’t signaling the economy is slipping into a recession. And there has been no shortage of recession chatter over the last year.