Some bright spots in the jobs report but things are slowing

by Steve Randall07 Oct 2019

The US economy added 136,000 jobs in September and the figures for the previous two months were also revised higher by a combined 45,000.

But despite the gains – and the reduction in unemployment rate to a 5 decade low (3.5%) – there are signs that the labor market is slowing, which could mean tougher conditions ahead.

The US Department of Labor stats show that gains were seen across many sections of the American population.

“The unemployment rate for Americans with less than a high school diploma dropped to a record low since reporting began in 1992. The African-American unemployment rate held at a record low from August and the unemployment rate for Hispanic-Americans set a new record low. Adult women matched their lowest unemployment rate during the Trump Administration at 3.1%, which is the lowest since 1953,” said Secretary of Labor Eugene Scalia.

But in a statement, the Conference Board think tank noted that “Job growth remains on its slowing trend even as labor markets continue to get tighter. While wages dropped slightly, finding qualified workers is likely to get more difficult.”

However, the statement also stated that overall “there is evidence that the labor market is still healthy and does not necessarily increase the likelihood of further rate cuts by the Federal Reserve in the remainder of the year.”

Bob Duncan, chief economist at Fannie Mae, doesn’t agree that interest rates will remain on hold.

“The report does little to clarify the divergent views on the Federal Reserve about whether the economy is slowing or not, but we continue to believe the Fed will cut rates this quarter due to trade uncertainties and weak manufacturing data,” he said.

Duncan also expressed concern about weakness in the construction sector.

“Residential construction employment (including specialty trade contractors) increased by 3,400, a relatively weak gain considering the positive housing data we have seen so far in the third quarter,” he said. 

Prime-age participation
First American Deputy Chief Economist Odeta Kushi welcomed the jobs report but said that the prime-age labor force participation rate needs to continue rising to drive wage growth.

“Wage growth for all production and non-supervisory employees on private non-farm payrolls, a primary driver of household income growth and house-buying power, remained strong with a 3.5% increase compared with a year ago. Add that to low mortgage rates and it’s a good boost for house hunters, she said. “While the prime-age labor force participation rate remains below the 2007 level and the long-run trend, if we see continued growth to 83%, it could push wage growth (for all production and nonsupervisory employees on private nonfarm payrolls) to as high as 3.8%.”

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