The US unemployment rate fell in September to 7.2 percent, but the economy added a disappointing 148,000 new jobs.
And by one important measure the job market is stagnant: The number of employed people stayed flat in September, relative to the overall adult population as tallied by the Labor Department.
To some degree, that’s happening because more people are entering retirement. But it’s also a sign that many Americans are opting out of the labor force in a still-weak job market.
The September job tally came in below what economists had forecast. It’s down from a figure of 193,000 nonfarm jobs added in August. And it’s a snapshot taken prior to a damaging government shutdown that’s expected to make October a weak month for the labor market.
“This employment report showed that the economy was in a mediocre condition just prior to the shutdown,” says Doug Handler, chief US economist at IHS Global Insight in Lexington, Mass.
His outlook, written after the Labor Department’s morning report, is that gross domestic product (GDP) will grow at an annualized rate below 2 percent in the third quarter and at a similar slow rate in the fourth quarter, because of the now-ended federal shutdown.
Investors took the job-market numbers as a signal that the Federal Reserve won’t scale back on its bond-buying program called “quantitative easing” before the end of the year. The policy is designed to hold down long-term interest rates and stimulate growth.
Based on that outlook, US stock prices rose Tuesday. But a continuation of Fed bond purchases also postpones the day when the central bank raises its guard against potential inflation – a prospect that helped push the US dollar down Tuesday on foreign-exchange markets.
Slack in the job market may also signal greater urgency to members of Congress as they consider how to bridge a partisan gap over the federal budget. The shutdown resulted from differences between the Republican-controlled House and the Democrat-controlled Senate. The two sides agreed to end the shutdown last week, but now face a new set of looming deadlines on the budget for the current fiscal year.
With the big shopping season of the year approaching, National Retail Federation President Matthew Shay said in a statement Tuesday that he’s “cautiously optimistic … for a solid fourth quarter.”
But he said retailers’ seasonal hiring will depend on seeing “evidence that our policy leaders will take a more constructive approach to the second round of discussions about our country’s fiscal health. Otherwise retailers will see continued erosion in consumer confidence….”
Many economists and business leaders say the fiscal challenge goes beyond patching together a deal for the current fiscal year, which ends Sept. 30, 2014. Job creation will be helped, they say, if Congress can agree on a longer-term plan to slow the rate at which entitlement spending is rising.
That could enable faster economic growth, in part by freeing up more federal dollars for productivity-boosting investment in things like infrastructure and education.
“We have a spending problem” and “we have a growth problem,” US Chamber of Commerce President Tom Donahue told reporters Monday at a breakfast hosted by The Christian Science Monitor.
Although job creation wasn’t very strong in September, one positive trend is that it was broad-based. Employers were hiring in industries ranging from construction and transportation to retailing and professional services.
“State and local governments added 29,000 education jobs, allowing for a ray of hope that an era of very tight budgets may be easing somewhat,” says Mr. Handler in Massachusetts.
Labor Department job reports are normally released on Fridays near the start of each month. The September report was delayed due to the partial shutdown of federal agencies.
The shutdown’s impact on the wider economy will show up in the October report.
Jason Furman, who chairs the White House Council of Economic Advisers, on Tuesday cited weekly reports on unemployment claims as evidence that the partisan brinkmanship had a “disruptive” effect on job creation. But it’s hard to forecast how big that disruption will be.