The topline unemployment rate fell under 8% for the first time in 43 months in September, down to 7.8%. However, non-farm payrolls increased modestly, by 114,000. The payroll increase was in line with expectations; the drop in the topline rate was not. Big revisions upward in the July (from 141,000 to 181,000) and August (96,000 to 142,000) may have helped nudge that rate downward. There was also a noticeable jump in the employment-population ratio, from 58.3% in August to 58.7% in September, around the level of the spring. The labor force participation rate edged up to 63.6%.
Usually we would see a drop in the topline unemployment rate that didn’t totally match the payroll increase when the employment-population ratio stayed constant or fell. So I think you have to chalk this up to noise in the data. Remember that the topline rate and the payroll increase are derived from two different surveys. So sometimes they don’t fully match up. This is definitely a fortuitous situation for the Obama Administration, who now removes another talking point on jobs, by getting that topline rate below 8%.
Let’s look at the rest of the survey. The number of unemployed persons took a major drop down in the household survey, by 456,000, and total employment took a major rise, up 873,000. That accounts for the drop in the topline rate, and could have something to do with that benchmark revision from a couple weeks ago, when the government found an extra 384,000 uncounted jobs over the previous 12 months. The official number of unemployed stands at 12.1 million, but that does not include those who have dropped out of the labor force. What’s more, long-term unemployed (27 weeks or more) remained constant at 4.8. This makes up 40.1% of the total unemployed, and if unemployment benefits are not extended at the end of the year, all of them will see their benefits cut off. A lot of people moved into the “involuntary part time workers” category, from 8 million to 8.6 million.
In the establishment survey, the big gainers came in health care (+44,000), and the category known as transportation and warehousing (+17,000). Manufacturing fell by 16,000. For the first time in a long time (although this trend started last month, but wasn’t known until now because of the revisions), the government sector added jobs, 10,000 in all. And that includes the postal service losing another 3,000. State government jumped by 13,000, while local government fell 7,000.
The average workweek went up minimally, by 0.1 hour, but the average hourly earning went up 7 cents, a decent clip. Average earnings are rising near the rate of inflation over the past year, by 1.8%.
Overall, it’s a decent jobs report if you include the revisions. The 114,000 for September isn’t great but if revised upward like previous months may turn out. And the drop in the rate will help tell a story for the Obama Administration, more than a debate performance. But of course, we still have a ways to go to put out the fire that is mass unemployment. It may be the worst of all possible worlds from that perspective; the drop in the rate makes it look like things are working, but the September payrolls number isn’t much to write home about. No time to step off the accelerator.