29,000 Jobs: Far Below Forecast

The September jobs report, released Oct. 2, was weak by almost any measure, and it landed a month before the Nov. 3 midterm elections. Employers added 29,000 jobs. Economists had expected roughly 90,000, according to consensus figures cited in coverage of the report; another survey of Dow Jones economists, as reported, had expected 84,000. Either way, the number came in far short of what the professionals predicted.

The numbers

The unemployment rate rose to 4.2% from 4.1% in August. Average hourly earnings are up 3.0% from a year earlier. The Bureau of Labor Statistics also revised the two prior months down: August's gain was cut to 133,000 from 162,000, and July flipped from a gain to a loss of 10,000 jobs. Together the revisions removed 60,000 jobs from earlier counts.

Put simply, the economy that was supposed to be adding jobs at a healthy clip added about 152,000 jobs over the past three months, roughly 51,000 a month, once the revisions are counted.

What the optimists say

Honesty requires giving the other side its due. First Trust, hardly a doom shop, called the headline numbers soft but said the details remain hearty, pointing out that civilian employment, the household survey measure that captures things like small-business start-ups, rose 406,000 in September. One analysis noted that the unemployment rate moved only from about 4.14% to about 4.18% before rounding, meaning the jump to 4.2% is partly a rounding story. The rate has stayed inside a 4.1% to 4.3% range since March. Healthcare continued to add jobs.

Those are fair points, and they are why no one should call a recession on the strength of one report. Payroll numbers are routinely revised, and as this report itself shows, the revisions can be large. The honest summary is that the labor market is cooling, and the data is mixed on how fast.

The Fed problem

The sharper story is what this does to the central bank. Coverage of the report noted that the Federal Reserve had been weighing a possible rate hike in October before the data arrived, and one economist said the weak number should be the nail in the coffin for an October hike. First Trust's view is that the Fed will not raise rates this month and will punt the decision to December.

That is a hard place for policymakers. With inflation still running above the Fed's target, a central bank that is leaning toward higher rates now faces a labor market that is losing steam. Raising rates into a softening job market is exactly the kind of move that turns a slowdown into something worse. Not raising them risks letting prices keep climbing. Americans who work for a living bear the cost either way.

The take

Conservatives have argued for years that the economy runs best when Washington lowers the burden on businesses and gets out of the way of hiring: lower taxes, lighter regulation, and a predictable policy environment. A jobs report like this one is a reminder that uncertainty is itself a tax. Employers who do not know what tariffs, interest rates, or regulations will look like next quarter tend to hold off on adding staff.

We will not pretend one month settles anything. The administration will point to the household-survey strength, and its critics will point to the payroll revisions, and both will be partly right. But the direction of travel deserves attention from both parties. Voters feel hiring and wages in their own lives, not in a consensus forecast, and a 3.0% annual wage gain that is barely keeping up with prices leaves little room for comfort.

The next tests are close at hand: the inflation report due Wednesday, Oct. 14, and the next jobs report in early November. Forecasts for both are forecasts, and the actual numbers may differ. If hiring does not rebound and the revisions keep running downward, the argument that this economy is strong will get harder to make with a straight face.