The employment situation is a set of labor market indicators. The unemployment rate measures the number of unemployed as a percentage of the labor force. Nonfarm payroll employment counts the number of paid employees working part-time or full-time in the nation's business and government establishments. The average workweek reflects the number of hours worked in the nonfarm sector. Average hourly earnings reveal the basic hourly rate for major industries as indicated in nonfarm payrolls. (Bureau of Labor Statistics, U.S. Department of Labor) Why Investors Care
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Highlights
The September jobs report was quite gloomy with payroll losses sharply exceeding expectations. But markets had curious reactions. Nonfarm payroll employment in September dropped another 159,000, following a decrease of 73,000 in August and a decline of 67,000 in July. Thus far, payroll jobs have fallen every month of 2008. The September drop in jobs was worse than the consensus forecast for a 100,000 decrease. The September fall was the worst since the 212,000 drop in March 2003.
The latest job declines were widespread. Manufacturing and construction jobs fell by 51,000 and 35,000, respectively. Rounding out the goods-producing sector, natural resources & mining rose 9,000 in September. Service-providing jobs declined 82,000 after falling 16,000 in August.
Within service-providing industries, weakness was led by a 40,000 drop in retail trade and a 27,000 decline in professional & business services. Also falling were financial activities, transportation & warehousing, wholesale trade, information, and leisure & hospitality. On the positive side, education & health services advanced 25,000. Also posting modest gains were government and also other services.
Average weekly hours were slipped to 33.6 hours in September from 33.7 hours in August.
On a year-on-year basis, nonfarm payroll employment declined to down 0.2 percent in September from down 0.1 percent in August.
On the inflation front, average hourly earnings eased to a 0.2 percent rise in September, following a 0.4 percent gain the month before. The market had projected a 0.3 percent increase.
Turning to the household survey, the civilian unemployment rate held steady at 6.1 percent in September and matched the consensus projection for no change.
The Labor Department indicated that Hurricane Ike likely had minimal impact on the job and unemployment estimates.
"For the weather conditions to have affected payroll employment, people would have had to be off work for the entire pay period and not paid for the time missed. . . . In the household survey, people who miss work for weather-related events are counted as employed whether or not they are paid for the time off."
The September employment report was quite negative. But markets reacted in an unexpected manner. Equity futures rose and interest rates firmed. The report appears to be seen as a clincher for the U.S. House of Representatives to pass legislation to rescue the financial system. Some also see the Fed as more likely to cut interest rates.
Nonfarm payroll employment in August fell 84,000, following a decline of 60,000 in July and a decrease of 100,000 in June. The latest decrease was widespread. Manufacturing and construction jobs fell by 61,000 and 8,000, respectively. Service-providing jobs declined 27,000 after falling 12,000 in July. On the inflation front, average hourly earnings posted a 0.4 percent gain in August. Average weekly hours were unchanged at 33.7 hours in August. The civilian unemployment rate jumped to 6.1 percent from 5.7 percent in July. The August number was the highest since the 6.1 percent seen for September 2003. The September jobs report will carry huge significance as it is the last employment report before the November 4 presidential election.
Nonfarm payrolls Consensus Forecast for September 08: -100,000
Range: -156,000 to -67,000
Unemployment rate Consensus Forecast for September 08: 6.1 percent
Range: 6.0 to 6.3 percent
Average workweek Consensus Forecast for September 08: 33.7 hours
Range: 33.5 to 33.8 hours
Average hourly earnings Consensus Forecast for September 08: +0.3 percent
Range: +0.1 to +0.4 percent
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During the mature phase of an economic expansion, monthly payrolls gains of 150,000 or so are considered relatively healthy. In the early stages of recovery though, gains are expected to surpass 250,000 per month. |
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The civilian unemployment rate is a lagging indicator of economic activity. During a recession, many people leave the labor force entirely, so the jobless rate may not increase as much as expected. This means that the jobless rate may continue to increase in the early stages of recovery because more people are returning to the labor force as they believe they will be able to find work. The civilian unemployment rate tends towards greater stability than payroll employment on a monthly basis. It reveals the degree to which labor resources are utilized in the economy. |
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