A 50-Year Low for Unemployment - October 7, 2019

The unemployment rate fell to a 50-year low in September, dropping 0.2% to 3.5% per the U.S. BLS. It ties the low last reached in December 1969. It seemed appropriate to lead off with a graphic that highlights the history going back to 1950.

If we break through the late 1960s low of 3.4%, we’ll have to travel all the back to the early 1950s to find a lower rate.

But the report itself wasn’t all that rosy, but it wasn’t bad either. Included in the release was the Establishment survey’s nonfarm payroll number for September, which rose a modest 136,000.

It’s not impressive, but it’s not a sign that hiring is slowing too quickly.

If we look at broader trends, however, we’ll see that the slowdown in the economy has affected payroll growth this year.

The economy has created 2.1 million jobs over the last 12 months. It’s a solid number, but it’s down from 2.8 million jobs created in the 12 months ended January 2019.

What’s going on? The uncertainty generated by trade tensions may slowly be seeping into hiring decisions. The trade war between the U.S. and China has hurt global trade, which has slowed global economic growth. In turn, the trade war has taken a toll on business confidence and business spending.

Earlier in the week, a key gauge of manufacturing—the ISM Manufacturing Index—recorded its lowest reading since 2009 (Institute for Supply Management). The unexpected weakness raised fears that growth might be slowing too quickly. Stocks reacted accordingly.

Yet, other surveys of manufacturing haven’t been as soft, including the Fed’s regional surveys.

Elsewhere, we’ve also started to see an uptick in housing activity thanks to lower mortgage rates. And, layoffs remain low (U.S Dept. of Labor).

While the Conference Board’s Leading Index is foreshadowing slower growth, it’s not flashing a recession signal at this time.

Friday’s jobs’ report suggested recession fears may be overblown.