Employment Spike Exceeds Expectations
If Friday’s jobs report is any indication, the U.S. economy took a big step forward during September. However, factors still exist that could slow the continued stride.
According to data released today from the U.S. Department of Labor’s Bureau of Labor Statistics, total non-farm payroll employment increased by 248,00 jobs last month, driving the unemployment rate down to 5.9%.
The unemployment rate hasn’t been that low since July 2008 at the start of what’s been referred to as the Great Recession.
September’s progress compared favorably to August, during which a meager 142,000 jobs were added to the books and the unemployment rate remained a static 6.1%. September’s actual jobs performance also beat economists’ overall predictions of 213,000 new jobs expected, as well as the average growth rate of 212,000 jobs per month since January.
Sectors that gained new jobs included business and professional services, which added 81,000 positions nationwide in September, compared to an average sector growth of 56,000 jobs per month throughout the year.
While most professional sectors gained jobs, only legal services declined by 5,000 positions during the month, according to the Department of Labor.
Other areas that saw growth in September included retail trade, which added 35,000 jobs last month; health care, which added 23,000 jobs; construction, which added 16,000 jobs; information processing, and financial services, which both added 12,000 jobs.
While overall optimism may be warranted, many economists continued to temper their enthusiasm with a touch of angst given the many variables that could trip economic progress, according to Mark Hamrick, Washington bureau chief for the consumer financial website Bankrate.com.
“We have to be thankful things have improved to the degree they have, but we don’t yet know what the ending to this story will be,” Hamrick said. “Watching the economy is like being a Chicago Cubs fan in that we continually hope for better times ahead.”
Hamrick’s original September prediction of 200,000 new jobs was predicated by August’s lackluster performance. But other aspects still exist that could comprise the economy’s widening stride, including the ever-present geo-political challenges in Ukraine and, now, Hong Kong.
“The news out of Europe worsens and we don’t know what Vladimir Putin has up his sleeve,” Hamrick said. “All of this is eroding consumer confidence and ultimately this could weigh on economic growth and consumer demand.”
Hamrick admitted that the payrolls piece of the economy has improved, but wage growth remained flat in September, inching up just 2% on a year-over-year basis. All jobs are not created equal, and that is especially applicable to compensation, he said.
“There are reasons to believe the quality of new jobs have not recaptured what has been lost,” Hamrick said. “We still have some slack to extract from the system, and that’s one of the only things on which we see any bipartisan agreement.”
As for those returning to the workplace, Hamrick said that women will likely not benefit as fully in the current recovery as their male counterparts.
“Women are working, but it’s just not always for anyone else’s money,” Hamrick said.
Pay equity is often the reason for women’s departure from the work force, some research has shown. Older women may find themselves at home raising children or, increasingly, caring for elderly parents.
Younger women often are going back to school, which will pay off in the future when new graduates come more fully equipped to command higher wages in the workforce, Hamrick said.
“The U.S. might end up with an outsized improvement [in women’s employment and wages] down the road, but that may take time materialize,” he suggested. “We can hope for tremendous improvement, but I wouldn’t bet the house on that.”
Even prior to Friday’s job numbers release Hamrick remained positive about overall economic growth. However, given the variety of variables, caution is still advised.
“I would give the economic recovery a B because we had a sharp snapback in GDP in the second quarter and a good level of growth in the quarter just ended,” Hamrick said. “But it could very easily become a B- due to the lack of wage growth for average Americans.”