Since the data was released 14 hours ago, I’m calling this my Jobs Night rather than Jobs Day update. I’ll keep it short for the holiday weekend.
Today’s employment report:
- Net payroll employment fell by 54,000 jobs in August.
- The net –54K job loss was the result of +67 K private sector jobs, and –121 K government jobs, almost all of which were Census workers.
- The unemployment rate ticked up from 9.5% to 9.6%.
- The average workweek was unchanged.
- Data for the last two months were revised upwards.
Remember that different audiences look at employment data in different ways:
- People’s lives are most affected most by the level of employment: how many people are working, and what is the unemployment rate? These numbers are still terrible.
- As both a policy and political matter, Washington cares about the level, but even more about the direction and rate of change: are we adding or subtracting jobs, is unemployment rising or declining, are we “headed in the right direction?” Here, the data supports political claims that we’re moving in either direction: the net number is negative, but the more trend-significant private sector number is positive. This gives each side of the political battle something to spin. The numbers still hover around zero, meaning even the positive private sector number is nothing to brag about.
- Markets and market commentators care about both of the previous factors, but even more about how the change compares with expectations about the data before it was released. Here the numbers were slightly better (less worse) than expected, so the markets ticked up upon the announcement.
Here are my quick thoughts about what the data means. I don’t claim this is either innovative or controversial, but instead just a simple explanation.
- As we have for the past few months, the employment situation continues to bump around close to zero. The underlying trend (taking out census) is slightly positive.
- A slight positive underlying job growth trend is, of course, better than a trend of losing jobs. The economy is continuing to improve, albeit slowly. Decceleration is not the same as decline.
- At the same time, it feels terrible because the level is so low and the growth rate is so slow. We’re down millions of jobs from full employment, and we’re not even creating the 150-ish K jobs per month needed to keep up with population growth. For things to feel better economically (and politically), we need much, much faster GDP growth and employment growth. When monthly job growth consistently breaks 150K you can start to breathe easy. If and when it’s increasing 300ish K net new jobs per month you can feel great about the pace of the recovery, given the depth of the hole.
- Today’s report is consistent with the other data we’ve been seeing, most of which continues to support views that GDP continues to grow slowly (1-ish percent rate?).
- Today’s report and the other data are inconsistent with an economy that is declining. We don’t appear to be double-dipping (which is different than drawing any conclusions about the future).