September Jobs Report Weaker Than Expected

The September jobs report was released this morning, after being delayed nearly three weeks due to the government shutdown. The U.S. economy added just 148,000 jobs for the month, lower than many economists had forecast. Meanwhile, the unemployment rate fell to 7.2 percent as more Americans dropped out of the workforce, according to the Bureau of Labor Statistics.

“This kind of report adds to the sense of foreboding about our economy,” said Claire McKenna, an analyst at the National Employment Law Project.

Weakness in the report can be traced mainly to the federal government, which actually cut 6,000 jobs in September. State and local governments added 28,000 jobs and the private sector made up the bulk of the gains, creating 122,000 new positions.

It’s likely that the threat of a government shutdown slowed the pace of hiring in most sectors of the economy last month.  Uncertainty surrounding the budget and the debt ceiling was gathering well before the government shuttered its non-essential operations on October 1.

The August payroll numbers, on the other hand, were revised up today from 169,000 to 193,000, suggesting the U.S. economy was firing on all cylinders prior to the budget showdown in Washington.

Just how much damage was done by the impasse remains to be seen. Preliminary reports put the hit to GDP around 0.3 percent. 

Financial markets responded well to the mediocre September jobs report, with the S&P 500 index rising ten points in early trading. The report was weak enough to ensure Federal Reserve stimulus continues at its current pace, while still being strong enough to indicate an expanding U.S. economy. Most economists now say the Fed will hold off on removing stimulus until well into next year. 

“This really raised the question for the Fed and Fed policy. They will be hard pressed to argue that there’s improvement in the labor market,” said Craig Dismuke, chief economic strategist at Vining Sparks in Memphis, Tennessee.

Other metrics in the report were also tepid; average hourly earnings increased a mere three cents in September, and the average workweek held steady at 34.5 hours.