By Denis Ouellet:
The unemployment rate fell in September to its lowest level
since January 2009, suggesting that summer job growth was stronger
than previously thought.
Employers added a seasonally adjusted 114,000 jobs, a tepid
pace that was accompanied by data revisions boosting the number
of positions added in previous months by 86,000. The new figures
showed that the nation added 181,000 jobs in July and 142,000
jobs in August, and that
third-quarter job growth was far higher than in the
spring
.
Still, part of the growth came from a surge in the number of
people taking part-time jobs because full-time slots weren't
available. Of the 104,000 new private-sector jobs, the bulk came
in health care, which added 44,000, and transportation and
warehousing.
Manufacturing employment fell by 16,000. (
WSJ
)
The charts below, from
Doug Short
, illustrate why the consumer side of the U.S. economy is going
nowhere.
(click to enlarge)
'
(click to enlarge)
(click to enlarge)
Education Matters
(click to enlarge)
Of the 114,000 new jobs, 104,000 were in the private sector. Yet,
all of the 86,000 in upward revisions for July and August
came in government jobs
.
- Governments have been cutting jobs almost every month since
November 2010 but went on a hiring spree lately. Since July,
governments have added 73k jobs after laying off 65k employees
between January and June. Hmmm…
- State and local governments have suddenly decided to boost
their educational employees: over the past 3 months, state and
local education-related jobs have swelled by 23k for state and
79k for local governments
. For the latter, the last 3 months' new jobs are only 4k shy of
the total job losses of the previous 9 months. Hmmm…
(click to enlarge)
- Excluding state and local education, governments have
continued to cut employment at an average rate of 10k per
month.
- Manufacturing employment fell again (down 38,000 in the last
two months).
- The number of part-time workers for economic reasons grew to
8.6 million in September from 7.7 million in March.
Part-Time Work Can't Support Full-Time
Spending
Meanwhile, the all important construction sector remains
stagnant:
(click to enlarge)
INTERESTING VIEWPOINT:
The September jobs report shocked many due to the big decline
in the unemployment rate. Given the ongoing debate about the
"quality" of the numbers, we think that a few clarifications are
warranted. First, the jobless rate is calculated from the
household survey, not the payroll
survey.
This a methodology similar to that used in Canada to report
jobs. Canadians are accustomed to the inherent volatility of such
surveys and as such, it is customary for us to look at
changes over a 6-month period
to really gauge the underlying trends in labour markets (that's
what the Bank of Canada does). So what is the situation in the
U.S.?
As today's Hot Chart shows, the U.S created 838K
full-time
jobs in September but the cumulative 6-month change is still
showing a loss of 64K (part-time jobs are up a million over the
period). The labour force showed a large increase of 418K jobs on
the month, but we are still down 356K since March. The part rate,
employment rate are also not that much different than they were
last spring.
The bottom-line is that the good performance in September does
not change the fact that the trend remains uninspiring over the
past six months. What's more,
the outlook is not that great
. As shown, the Monster on-line jobs index (a leading indicator)
recorded its biggest drop since October 2010 this month. This
points to a rising jobless rate.
(click to enlarge)
In all, my "educated" guess is that the October report will not
be so good and that the basic slow trend remains.
The YoY growth rate in employment is still 1.4%, but monthly
trends continue to point to a slowdown to 1.2%. Combined with slow
wage growth and inflation stuck in the 1.5-2.5% range, consumer
spending will likely remain weak well into 2013.
Domestic earnings will be harder to come by during 2013 while
the rest of the world will continue to struggle.
Equity markets are very cheap at present, but a slowing U.S.
economy will add to investors' angst about Europe and China,
keeping equities undervalued for a while longer (
PE's, QEs and Saudis
). Prudence remains paramount.
Disclosure:
I have no positions in any stocks mentioned, and no plans to
initiate any positions within the next 72 hours. I wrote this
article myself, and it expresses my own opinions. I am not
receiving compensation for it. I have no business relationship with
any company whose stock is mentioned in this article.
See also
Whisper Number Impact: Earnings Preview For
Caterpillar And Peabody Energy
on seekingalpha.com