Markets
DIA

Unemployment Unchanged, but Data Dismal

A generic image of a pen, a calculator and sheets
Credit: Shutterstock photo

Friday, October 2, 2015

The disappointing jobs report has put a big question mark over the health of the U.S. economy and the course of Fed policy. This report shows that the growth questions that prompted the Fed to hold off on raising rates last month aren't restricted to China and the global economy alone - they are as much centered on the domestic economic scene as well.

Headline job gains for September came in at 142K vs. estimates of 200K and the prior month's tally of 136K (which was revised considerably lower: 136K vs. 173K originally). The originally reported tally for July was also revised lower to 223K from 245K originally. The year-to-date monthly pace of job gains now averages at 198K, though the pace for the last three months is much lower at 167K. This compares to the monthly average for 2014 of 260K.

As disappointing as the report's 'headline' miss is, the report's internals like revisions, wages and the workweek are even more disappointing. The negative revisions to the last two months, particularly for August, is very dramatic as the originally reported number for that month has a history of getting revised in the positive direction. The unemployment rate remained unchanged at 5.1%, but average hourly earnings were unchanged from the month before and the average workweek actually declined a bit.

What this means is that the U.S. economy lost its growth momentum in a notable way during the summer months, with GDP growth likely close to +1% in Q3 after the +3% pace in the preceding quarter. We have been seeing this in trade and manufacturing sector numbers, and this shows that the Fed's cautiousness on the liftoff question was more than justified.

The low unemployment rate notwithstanding, the Fed is justifiably hesitant to start the monetary policy normalization process given loss of growth momentum internally and disinflationary forces from abroad. Unless proven otherwise by incoming data over the next two months, today's report moves the liftoff decision to somewhere early next year - it seems to be off the table for this month as well as December.

Sheraz Mian

Director of Research

Note: In order to get an email alert each time this author publishes a new article, click on the 'Follow Author' link at the bottom of the top-right box of links. In addition to this pre-market open daily article about the market, economy, and the corporate earnings picture, Sheraz also provides detailed earnings analysis in his weekly Earnings Trends and Earnings Preview reports.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

SPDR-SP 500 TR (SPY): ETF Research Reports

NASDAQ-100 SHRS (QQQ): ETF Research Reports

SPDR-DJ IND AVG (DIA): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

DIA SPY QQQ

Other Topics

Stocks US Markets

Latest Markets Videos

    Zacks

    Zacks is the leading investment research firm focusing on stock research, analysis and recommendations. In 1978, our founder discovered the power of earnings estimate revisions to enable profitable investment decisions. Today, that discovery is still the heart of the Zacks Rank. A wealth of resources for individual investors is available at www.zacks.com.

    Learn More