September’s jobs gain —‘solid’ or just ‘stubbornly average’?

Reaction to the Labor Department’s report that the U.S. economy created 156,000 new jobs in September went in all directions.
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Reaction to the Labor Department’s report that the U.S. economy created 156,000 new jobs in September went in all directions. Neither weak nor strong, the numbers gave optimistic economists reason for hope and pessimists cause for concern.

MarketWatch called the increase “a solid gain,” noting that most segments of the economy added workers and that hourly pay rose 0.2 percent, to $25.79, for the typical employee, part of a 2.6 percent climb during the past year.

“The jobs market remains a relative bright spot in an environment that continues to be characterized by moderate growth overall,” said Jim Baird, chief investment officer in Plante Moran Financial Advisors.

The jobless rate rose slightly, to 5 percent, but MarketWatch said that was largely because a sizable 444,000 decided there might now be jobs for them and entered the labor force.

The New York Times said the report showed that the country’s jobs machine “keeps chugging,” adding just enough positions to meet the needs of people newly looking for work and to attract those who were discouraged by the Great Recession.

“It was solid, not spectacular,” Diane Swonk, an independent economist in Chicago, told the Times. “The good news is that participation went up, even though the unemployment rate did, too. Regaining that ground is very important.”

Reactions that the Wall Street Journal compiled were less positive

Nela Richardson, chief economist at the real estate brokerage Redfin, called the report “stubbornly average” and said it “gives no impetus for anything on the economy’s to-do list. There’s no sign of an overheating economy that would justify a rate hike; no ground swell of construction hiring that would finally hint at a return to a normal pace of housing starts; no big wage gains that would give hope for renewed productivity gains.”

“If the Fed wants to take from this report that the economy is robust, expanding and in need of higher policy rates there is certainly enough in here to support such action,” said Steve Blitz, chief economist at M Science in New York. “They have, after all, essentially convinced themselves and some others that as along as total payroll growth is above 150,000 per month this suggests strong economic growth.”

Crain’s Cleveland Business focused on the glass-half-full versus glass-half-empty tone of the debate and pointed out that Loretta Mester, president of the Federal Reserve Bank of Cleveland, was in the half-full camp.

"It's a solid labor market report," Mester, a voting member of the Fed's rate-setting panel, the Federal Open Market Committee, told CNBC. "This is very consistent with what we expected to see."

Mester also told the network that the jobs report is sufficiently strong enough to justify a modest rate increase. The Fed committee’s next meeting will end Nov. 2, six days before the presidential election. Most economists believe the Fed will not act so close to the election for fear of affecting it; a move in December is considered more likely.

The Times said the report identifies trends that the campaigns of Democratic candidate Hillary Clinton and Republican Donald Trump can use to justify their differing positions.

The jump in participation, and healthy gains in higher-paying professional services fields, help Clinton argue that the economy is growing steadily and creating good-paying jobs. A 13,000 decline in the number of manufacturing jobs helps Trump make the case — especially to blue-collar workers — that he should be in the White House trying to create more jobs for them.

A separate economic report last week showed that U.S. auto sales have slipped a bit, but remain healthy. They fell slightly in September — 0.5 percent, to 1.44 million units, which reflects an annualized purchase rate of 17.76 million vehicles, according to Autodata.

The Big 3 U.S. automakers — General Motors, Fiat Chrysler and Ford Motor — did better than analysts expected, although they reported declines in U.S. sales for the month.

USA Today said the industry is expected to finish 2016 with total sales that are nearly as high as the record 17.5 million vehicles it sold last year.

"2016 is shaping up to be another great year for the auto industry,” Toyota U.S. sales chief Bill Fay said in a conference call, adding that the country’s job gains, income growth and rising consumer confidence show that it's "still a great business environment to be in."

Underscoring Fay’s remarks, consumer credit increased in August at the fastest rate in a year. The Fed said consumer credit rose at a seasonally adjusted rate of 8.5 percent, and that represents a gain of $25.9 billion.

The consumer credit numbers augur well for the September retail-sales report, which the Commerce Department will issue Friday. Analysts’ median forecast is that sales rose 0.7 percent, reversing an 0.3 percent decline in August.

Apart from auto sales, the gain is expected to be 0.5 percent, a result that would be heartening to stores of all kinds as the holiday season nears.

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