Sunday, October 4, 2015

September jobs disappoint, are things slowing down?

There was little good to report out of Friday’s shockingly bad jobs numbers. Not only is the increase of 142,000 well below the average monthly gain of nearly 240,000 that we had been having, but August and July were also revised down by a combined 59,000 jobs, meaning it’s also the worst 3-month stretch for job growth since Dec 2013- February 2014. The unemployment rate staying at its low level of 5.1% (technically, it dropped to 5.05%) also isn’t necessarily great news, as it is a result of 350,000 people dropping out of the work force instead of a reflection of job growth.

Even more concerning is that the stalling of overall job growth comes at a time when government employment is bouncing back, with more than 115,000 jobs added in that sector over the last four months. What this means is that private sector job growth is at its lowest levels in more than 3 years, and a look inside the sectors shows that much of the weakness is a result of the oil bust and the strong dollar hampering heavy industry.

Job losses, June-Sept 2015
Mining and Logging -30,000
Manufacturing -16,000

And if Friday's events in Wisconsin are any indication, that downtrend isn't likely to change in October, as a cheese plant in Plymouth announced plans to lay off 300 workers, and in Lake Mills, Hamlin Inc is closing their plant, which will cause 175 workers to lose their jobs.
The struggles in those industries are also reflected in overall manufacturing output growth flatlining to its lowest level in 2 ½ years, along with stagnating wages that we’ve seen in the last year in both of those industries, as well as the higher-wage construction industry. I’ll remind you that these numbers are before inflation.

Change in avg. weekly wage, Sept 2014- Sept 2015
Durable Goods Manufacturing +0.4%
Mining/logging +0.5%
Construction +0.6%
All Manufacturing +1.5%

And the news wasn’t any better in September, as weekly wages in both Manufacturing and Construction fell, as did the private sector as a whole, with average weekly earnings sinking by 0.3% (they are up 2.2% for the year).

Now combine that with the S&P 500 index declining another 2.6% after August’s drop of 6.3% (oddly, it had a major reversal after mid-morning on Friday and closed up 1.4% after the bad news came out). This was a pretty lousy way to end the 3rd Quarter of 2015, and it’s noteworthy that the Atlanta Fed cut its estimates of GDP growth in half this week, predicting an increase of less than 1% when we those numbers are released at the end of this month.

Let’s not panic too much, but this subpar September report adds to the concern I had with August's U.S. job numbers disappointed, and I’m starting to wonder if after 5 years, the Obama Recovery is starting to slow down if not stall out.

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