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The Employment Situation Report released by the Bureau of Labor Statistics today (Friday, October 2nd, 2015) describing activity in September was, in no uncertain terms, disappointing.  The consensus expectation called for a 200,000 increase, what we got was a below par 142,000 jobs increase.  This clearly marks a slowing in growth given that the average increase for this year has been 198,000 and last year’s average was 260,000.  September’s growth was less than expected and slower than recent history — but it did extend to an impressive 60 consecutive months of growth.

We’ve known that the headwinds have been building in the form of a downshifting China, a stronger dollar (both giving rise to weaker foreign demand), turmoil in the financial markets and the decelerating energy sector.  The sense is these factors are causing some employers to pause before staffing up, particularly those multinational and/or export dependent enterprises.  Noteworthy is the observation that during, September the percentage of industries growing dropped to 52.9 compared to an eight-month average of 58.2 percent – suggesting that the weakness crosses a fairly wide range of sectors.

The unemployment rate was unchanged at 5.1%, however, the unemployment rate might have increased had not the labor force participation rate declined by two tenths of a point to 62.4%.  Moreover, compared to August, average hourly earnings were flat and the average workweek declined by one tenth of an hour to 34.5.

Nothing observed in the report points to optimism, all the metrics indicate a soft month or two, but…there is no cause for panic. It is not uncommon for a soft patch to be observed even as an expansion continues.  The U.S. economy may be losing steam but it maintains momentum when one considers the broader economic benchmarks. While employment growth is slowing, it is still growing. The extent and length of the softer growth trajectory appears to be manageable within the context of the broader recovery.

Stay tuned given that there is a still low, but increasing level of risk dampening the outlook.

 

Steven R. Drexel


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