By Denny Gulino
WASHINGTON (MaceNews) – The jobs news from September continued on an exceptionally good path Friday yet an increasingly fretful economic picture a week into October suggested the context may be shifting, as interest rates climb, the Nasdaq loses steam and analysts nitpick Federal Reserve policy.
The new 3.7% unemployment rate, atypically large improvements for previous months with 87,000 more payroll slots added for July and August and the presumed moderating effect of Hurricane Florence all made the latest payrolls total, a weakish 134,000, seem at least adequate.
Average weekly earnings disappointed as they seem to do more often than not, slipping back a tenth to 2.8% over the year. Year ago comparisons are hard to overcome despite the slow spread of higher minimum wages across the country, amplified in October by Amazon hitting the $15-an-hour mark.
The fuzzier of the two employment surveys, covering households, showed those employed up substantially in September by 420,000, those unemployed diminishing by 270,000 and the labor force expanding by 150,000. So far, so good.
Yet not to be ignored was that stubborn categorical gain – 74,000 – in those exiting the labor force, going the wrong way in an era of full or nearly full employment opportunity.
All together it was enough to get the unemployment rate down to 3.7%, the best number since late 1969 and in line with the Fed’s “dot-plot” for year-end – which for next year anticipates more improvement to 3.5%.
The report suggested that the impact from the month’s Hurricane Florence was not significant on a national basis and did not impinge on the survey response rates.
Even with its picture of steady improvement 10 years after the financial crisis – a monthly average of 201,000 jobs over the past year just slightly decelerated to 190,000 for the latest three months – the report did not provide any of the answers to current broad concerns.
Wage growth remains soft, still well below the 3% to 3.5% upward trajectory before the crisis. New entrants to the work force are strangely almost nonexistent, up just 2,000 in September. Why were those forced into part-time work in September by economic conditions or “slack work” so numerous – up nearly half a million?
In the markets why on jobs report day would the Dow industrials be down more than 200 points at midday, the Nasdaq off 1%, as it sinks the most below its 50-day average since late spring? Why would the long-bond yield jump on the jobs report while the 10-year advanced even more, to 3.227%, completing a week of surprising escalation?
The aperture of concerns could be widened even more to include the low rate of productivity growth – capping potential prosperity. Why do medium-term GDP forecasts, by the Fed and others, see a softening in the next decade while fiscal deficits climb?
There is the increasingly shrill criticism of the Fed as four more rate hikes by the end of next year are anticipated with seemingly mounting dread. And as federal spending climbs further out of control, there is a sense that governmental leadership mechanisms are becoming ossified as the coming midterm elections threaten to paralyze the national legislature to an even greater extent.
And is there some inexorable force deepening cultural and political divisions even as compensation inequality deepens, when September’s African-American unemployment rate is hailed as historically low – but is still nearly twice as a high as the rate for whites?
The labor participation rate, stuck at 62.7% in September, has changed little in years, though as Fed Chair Jerome Powell repeatedly explains, that’s bucking the trend of retiring Baby Boomers. In a country with a September population of 258.3 million, 60.4% were employed, another number that is stuck in a narrow range.
The report could serve as a reminder that future prosperity depends on more labor inputs as well as more capital investment and discernible productivity gains. Since September 1969, when the unemployment rate was last as low as 3.7%, those employed in America have doubled, from 78,250,000 to 155,962,000 last month. GDP per capita in that period grew from $5,055 to nearly $58,000, leading the world.
As population growth slows, and if capital investment keeps lagging – though it’s somewhat better lately – and if productivity growth remains nearly stagnant, it will all add up to a marked deterioration in the economic and investment climate. That is the challenge for the years immediately ahead and beyond. At some point the full magnitude of that challenge will likely begin to be anticipated, in the markets and by American society in general.