Unemployment Rate Drops to 50-year low at 3.5% Amid Weak Job Growth

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate in September FELL to 3.5;
  • Number of payroll jobs INCREASED 136,000 in September, down from 168,000 in August;
  • Average weekly earnings FELL in September to $966.30, a 2.6 percent year-year gain, down from the 2.9 percent year-year gain in August;
  • Average hourly earnings FELL  in September  to $28.09 a 2.9 percent annual increase, down from 3.2 percent in August
  • Private sector jobs INCREASED 114,000; Government payrolls ROSE 22,000, principally in local and state governments;
  • Prior month job totals were REVISED UP, 45,000; the number of new jobs in August was revised from 130,000 to 168,000, the number of new jobs in July was revised to 166,000 from 159,000;
  • Four industry sectors lost jobs: retailing (down 11,400), “other services” (down 3,000) and manufacturing (down 2,000) and utilities (down 2,000);
  • The unemployment rate for Hispanics fell to 3.9 percent – lowest on record; Unemployment rate for blacks remained at its all-time low, 5.5 percent;
  • The unemployment rate for those over 25 without a high school diploma also fell to the lowest level on record – 4.8 percent
  • The number of persons not in the labor force DECLINED 8,000 to 96,215;
  • Labor force participation rate REMAINED at 63.2 percent, up from 62.7 percent a year ago;

Trends:

  • Payroll jobs were up for the 1088h straight month; 3Q job growth averaged 157,000 per month down from 189,000 per month in the 3rd quarter last year;
  • The unemployment rate dropped to its lowest level since June 1969
  • The year-year growth in average weekly earnings matched July for the weakest growth since October 2017 (2.3 percent)
  • Retail jobs fell for the seventh straight month

Data Source: Bureau of Labor Statistics:

Image result for labor market

Aside from the lowest unemployment rate in more than 50 years and record low unemployment rates for Hispanics and those without a high school diploma, there wasn’t much to cheer about in the October Employment Situation release from the Bureau of Labor Statistics.

Indeed, the report showed a number of concerns about the labor market:

  • Weekly earnings fell and showed the weakest year-year gain in almost two years (matching July for that ‘distinction’)
  • Hourly earnings dropped for the first time in almost two years with the weakest year-year increase in  14 months;
  • Job growth in the third quarter was down almost 17 percent from the third quarter a year ago; and
  • Manufacturing jobs fell.

While the dip in manufacturing jobs was relatively low, it demonstrated the continued weakness of the sector since the Trump Administration invoked higher tariffs and trading partners reacted.  In the 18 months from August 2017 through January 2019, the economy added an average of 23,000 manufacturing jobs per month. Since January though new manufacturing jobs have all but disappeared, increasing at a rate of about 3,000 per month.

The pattern is similar in the construction sector – which is also affected by higher tariffs on construction materials. From August 2017 through this past January, the number of construction job grew an average of almost 28,000 per month. Since January, the monthly growth has been 6,800, including April when the number of construction jobs jumped 34,000.

To be sure there were some gains reported for September, but they were weak as professional and business service jobs increased along with health care. construction employment rose along with a relatively strong gain in health sector jobs, no doubt a consequence of “job-killing” Obamacare.

The dip in earnings is probably the cause for even greater concern. Average earnings are often pulled down with a proliferation of low wage jobs in retail and leisure and hospital, the latter including low paying restaurant and food service jobs. In September though those two sectors combined added fewer than 10,000 jobs of which food service accounted for just 1,500 new jobs.

Instead, September saw earnings drop in what are usually higher paying sectors such as professional and business services along with the utility sector which historically records some of the highest earnings as well as the information sector which includes publishing, telecommunications and broadcasting.

In sum, the employment report painted a picture of a weakening economy which has yet to feel the full brunt of the Administration’s trade war.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

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