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Wall Street to Your Street


Job Growth Slow in September for Second Straight Month

After several strong months of job growth in 2016, U.S. employers have tapped the brakes the past two months. According to the U.S. Department of Labor employment report issued Oct. 7, U.S. employers added 156,000 new nonfarm jobs in September, following a gain of 167,000 new jobs in August (Exhibit 1).

exhibit 1(The August number was revised up from the initial report of 151,000 new jobs reported a month ago.)

The average monthly job growth for 2016 has dropped to 178,000, which is well below the 229,000 average in 2015. Job growth the past two months was also well below the previous two months. Employers had added 252,000 jobs in July and 271,000 new jobs in June.

With the new report, the unemployment rate moved up slightly from 4.9% to 5.0%, as more people entered the workforce than found jobs (Exhibit 2).Exhibit2

The number of unemployed persons looking for jobs inched up from 7.8 million to 7.9 million for the month.

The number of long-term unemployed (those jobless for 27 weeks or more) remains high – approximately 2 million Americans – which accounts for 24.9% of the unemployed (Exhibit 3).

Exhibit 3Here are some of the other key trends noted in the report:

  • The labor force participation rate for those in their prime working years (25- to 54-year-olds) edged up to 81.5%, the highest since 2012, but still 1.5 percentage points below the prerecession level (Exhibit 4).
  • The average workweek moved up by 0.1 hours to 34.4 hours, and remains in a range comparable to that preceding the last recession (Exhibit 5).
  • Exhibit 4Average hourly earnings for all employees on private nonfarm payrolls moved up 6 cents to $25.79. Year-over-year, average hourly earnings have increased by 2.6%. Twelve months earlier, the average was $25.14, so the new figure represents a gain of 65 cents an hour.
  • Initial unemployment claims, a leading economic indicator, continue to remain at a historically low level, giving no indication of recession on the horizon (Exhibit 6).
  • People working part time who would prefer full-time work nudged down, but the total remains high and has not improved materially over the last year (Exhibit 7).exhibit 5

The low employment growth rate for September will likely give the Federal Reserve pause in considering an interest rate increase.

Job growth has been one of the few bright spots of the economy, and with two consecutive subpar months – along with a recent flattening of consumer spending – we believe the Fed will be reluctant to hike rates at their next meeting.

exhibits 6 & 7However, we believe a small rate hike could be beneficial to net savers without adversely affecting the economy or consumer spending, but that may not happen in 2016 unless job growth reaccelerates.

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