September Jobs Report

As expected, the Federal Reserve laid out its plans for ending its bond buying stimulus program in October. Many also expected the Fed to remove the phrase “considerable time” from its pledge that interest rates would remain low but it kept that phrase indicating that it is not in a hurry to raise rates (keeping interest rates low is one of the tools the Federal Reserve has to stimulate the economy). With Quantitative Easing coming to end, Fed watchers focus is now on the Fed’s interest rate policy. The Fed will look closely at the monthly jobs report when deciding its next steps.

September Expectations:

• +215k Payrolls
• 6.1% Unemployment
• Hourly Earnings +0.2%
• Work Week 34.5 Hours

The jobs report beat expectations on both payrolls and unemployment.

Headline Numbers

• +248k Payrolls
• 5.9% Unemployment

Deeper Numbers:

• Net Revisions +69k
  • July +31k to +243k
  • August +31k to +180k
• Average Hourly Earnings Flat
• Work Week 34.6 Hours
• Labor Force Participation Rate down .1% to 62.7%
• U-6 Unemployment: down .2% to 11.8%

Last month we said that the disappointing jobs numbers were at odds with much of the other economic data and the potential for upward revisions on future jobs reports was high. Both August and July payroll numbers were revised upwards with net revisions of 69k jobs. +180k payrolls in August looks much better than the originally reported +142k. Still, like last month, this report does nothing to change the long-term trend of a consistent though moderate expansion.

Strong September growth, upward summer revisions mean job growth is keeping on track. No clear acceleration, though. pic.twitter.com/1Eaptdhlrk

— Ben Casselman (@bencasselman) October 3, 2014

First sub-6% unemployment rate since July 2008. More than 6 years!

— Neil Irwin (@Neil_Irwin) October 3, 2014

The unemployment rate fell below 6% for the first time in the recovery. In the past, we’ve seen the unemployment rate fall for the wrong reasons – people dropping out of the labor force – but the unemployment rate crossed the 6.0% milestone for the right reasons this time. The broader measure of unemployment that takes into account persons marginally attached to the labor force and employed part time for economic reasons also fell to 11.8%.

Labor force shrank slightly. But employment up, unemployment down. So on balance, unemployment rate fell for “good” reasons.

— Ben Casselman (@bencasselman) October 3, 2014

The lede to this blog post mentioned the Federal Reserve and its reliance on the jobs report to determine when it will raise interest rates but jobs aren’t the only data the Fed is looking at. The Fed has a dual mandate to achieve maximum employment and keep inflation at reasonable levels. The Fed would feel pressure to raise interest rates early if inflation took off but wages actually fell in September. With good payrolls and no wage pressure to increase rates, this was the perfect jobs report for the stock market.

Feel the inflation: Average hourly earnings the past year are up just 2 percent.

— Matt O’Brien (@ObsoleteDogma) October 3, 2014