x
Your preference has been saved. Remove your saved preference.
You must supply both a username and a password to login.
You must supply a username, password and token to login.
Sign on
Passport secured login icon  
 
Wealth Management
Asset Management
Asset Servicing
Insights & Research
About Northern Trust
Search go
Click to close drop down menu.
 
Click to close drop down menu.
Financial Intermediary
Learn about asset management solutions designed for Retirement Plan Advisors, TAMPs/Outsourcing Providers, Subadvisory Program Sponsors, RIAs/Financial Advisors and Trust Institutions.
Institutional
Learn about asset management solutions including: global index management, active equity and fixed income, target retirement date funds, and manager of manager programs.
Individual
Get answers to your investment challenges with asset management capabilities including alternatives, exchange traded funds, fixed income, mutual funds and tax-advantaged equity.
Click to close drop down menu.
 
Northern Trust Logo
 

Weekly Economic Commentary

 
.
 
 
 
 
 
 
 
 
.
 

September Employment Situation: Headlines Alleviate Fear, Details Not So Rosy

October 7, 2011

orange_carrat_arrow Download PDF Version


Civilian Unemployment Rate: 9.1% in September, unchanged from August. Cycle high jobless rate for recession is 10.1% in October 2009.
Payroll Employment: +103,000 jobs in September vs. +57,000 in August. Private sector jobs increased 137,000 after a gain of 42,000 in August. Addition of 99,000 jobs after revisions to payroll estimates of July and August.
Private Sector Hourly Earnings: $23.12 in September vs. $23.08 in August; 1.9% y-o-y increase in September vs. 1.8% y-o-y gain in August.

Table 1 - 10 07 2011


Household Survey
– The unemployment rate held steady at 9.1% in September. The jobless rate has not improved in the first-half of the year (see Chart 1).


Chart 1 - 10 07 2011



The most worrisome aspect of data from the household survey is that a noticeable percentage of the improvement in employment in August-September period is part-time employment (see Chart 2). Therefore, it is entirely conceivable that part-time employment status can change to unemployed if economic conditions weaken.


Chart 2 - 10 07 2011



Establishment Survey
– Payroll employment rose 103,000 in September after an upwardly revised gain of 57,000 in August (previously reported as no change). The upward revisions of July and August resulted in 99,000 more new jobs. These headline numbers paint a more positive picture of the economy than other recent data pertaining to overall consumer spending and home sales. But, details cast a partial shadow on the September employment report. The increase in employment during September includes the return of 45,000 telecommunications workers in September after a strike in August. To account for this event, the average of August-September payroll employment is a better indicator of hiring, which works out to be only 80,000 jobs vs. a year-to-date average of 119,000 jobs.


Chart 3 - 10 07 2011
 
 

Highlights of changes in payrolls during September 2011:
Construction: +26,000 vs. -7,000 in August
Manufacturing: -13,000 vs. -4,000 in August
Private sector service employment: +119,000 vs. +51,000 in August
Retail employment: +14,000 vs. -1,000 in August
Professional and business services: +48,000 vs. +38,000 in August
Temporary help: +19,400 vs. +20,300 in August
Financial activities: -8,000 vs. +5,000 in August
Health care: +43,800 vs. +32,500 in August
Government: -34,000 vs. -15,000 in August

Manufacturing employment has failed to advance in the August September months, while construction employment grew sharply in September (see Chart 4). Health care employment (+43,800) continues to lift payroll employment, temporary help added nearly 20,000 to the headline number, and government employment fell.



Chart 4 - 10 07 2011

 

A loss of 5,000 postal service jobs and 35,000 local government jobs accounted for the weakness in hiring in the public sector. Local government employment has dropped 535,500 from the peak in September 2008 (see Chart 5).


Chart 5 - 10 07 2011

 

The pickup in hourly earnings ($23.12 vs. $23.08 in August) is noteworthy because the decline in August had raised the odds of further weakening of the economy. The year-to-year increase (1.9%) remains contained and offers little support for the hawks on the FOMC.

 

 Chart 6 - 10 07 2011

 

Conclusion – As the title of today’s comment suggests, the headlines were a mild surprise given the string of disappointing recent economic reports. The positives – increase in payroll employment and upward revision of July and August estimates, total workweek was longer than in August, and hourly earnings moved up after a drop in August – are noteworthy. The biggest negative is that job gains remain significantly tepid. Part-time employment helped to keep the jobless rate steady and average gains in payrolls in the last two months fall short of the year-to-date average. Moreover, payroll employment in the current economic recovery ranks at the bottom when compared with prior post-war business cycles, excluding the pace of hiring seen after the 2001 recession (See Chart , which is an indexed chart where the level employment in the trough of each business cycle is set equal to 100 to enable easy comparisons. A reading of 104 denotes a 4.0% increase in hiring from the trough, while 98 would mean a 2.0% drop in employment from the trough). The Fed has bought time with Operation Twist but it may have to consider additional unconventional monetary policy support if the economy continues to advance below trend and as a result the unemployment rate starts moving up instead of declining.

 

Chart 7 - 10 07 2011

 

 

 

 

 

 

 

 

 

 

 

.
The opinions expressed herein are those of the author and do not necessarily represent the views of The Northern Trust Company. The Northern Trust Company does not warrant the accuracy or completeness of information contained herein, such information is subject to change and is not intended to influence your investment decisions.
.
 
 
 
 
 
 
 
.