The September jobs report was late. The shutdown of the U.S. federal government put the release back by several weeks. Then, when the data finally showed up, it was uninspiring…at best. Some might say, “meh.” (For the uninitiated, “meh” is an exclamation used to express a lack of enthusiasm). At only 148,000, the headline payroll-growth number disappointed. The pace of U.S. payroll growth has definitively slowed in the last six months, which strengthens the argument for the Fed to postpone tapering their QE program into 2014.
The mediocre details of September’s late report broke down like this. Private sector payrolls increased by only 126,000. Definitely “meh.” August payroll gains were upwardly revised to 193,000 from 169,000 initially estimated, which was good. But July payrolls were revised down a second time to 89,000 from 104,000. This means net revisions for the last two months totaled only + 9,000.
The unemployment rate declined to 7.2% and the decline was driven by faster employment growth relative to labor-force growth – more people working relative to the number of people available for work. That’s good. However, the labor force participation rate held steady at 63.2%, the lowest level since 1978! A plummeting labor force participation rate has translated into an unemployment rate that’s declining even without robust job growth, and job growth has slowed since the first quarter. This, combined with generally weaker-than-expected data so far for the third and fourth quarter, points to modest growth.
And then there’s the shutdown. Not only will the shutdown delay the release of several pieces of economic data for October, but it’s also going to add a bit of noise to that delayed data. Data like GDP estimates for third quarter, corporate profits, and personal income and outlays for November are all a bit delayed. Federal workers weren’t at work to gather the data that they need to compile these statistics. And delaying things like GDP, corporate profits, personal incomes, and jobs puts the Fed in the dark as they make decisions about monetary policy. The Fed is already likely pushing any taper talk back into 2014, and flying blind on these data points by even a few weeks doesn’t help. That may mean that there’s more attention paid to the ADP jobs survey, which is usually released a few days ahead of the Bureau of Labor Statistics’ report. ADP’s sample period aligns with the BLS, and last year ADP revamps its methodology to make its data more comparable with the BLS. Here’s their methodology.
Then there’s the noise. The October numbers will look odd because of the two different surveys. The household survey will count federal employees as unemployed if they were on furlough, but the employer survey would count them as employed if they’re getting paid, which they were because of the Congressional agreement to guarantee back pay for furloughed workers. The Washington Post has a great recap of some of the particulars, especially government contractors who were sent home, but weren’t given back pay for the closure.
The yet-to-be-determined drag on growth from the shutdown plus delayed and noisy data reports plus a new Fed chair in 2014 all start looking like QE for longer than most expected. However, the Fed’s decision will be data dependent, as they keep reiterating. The next few jobs, housing, and GDP reports will be critical inputs in the Fed’s decision…even if they happen to be a bit late or a bit “meh.”
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