Delayed September Jobs Report Disappoints
Nothing to write home about in the September Jobs Report.
Delayed nearly three weeks by the government shutdown, the September Jobs Report released today by the Bureau of Labor Statistics fell far short of expectations. The consensus forecast going into this morning was that we’d see something in the neighborhood of 180,000 net new jobs added for the month, not a very good number but at least somewhat respectable. Just prior to the shutdown, the ADP report, which is sometimes but not always a harbinger of what to expect from the BLS report, came back with 166,000 new jobs added. Instead of hitting either of those targets, though, the official report fell far short of the target, indicating that the economy is still barely just trudging along:
Total nonfarm payroll employment rose by 148,000 in September, and the unemployment rate has little changed at 7.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment increased in construction, wholesale trade, and transportation and warehousing.
The unemployment rate, at 7.2 percent, changed little in September but has declined by 0.4 percentage point since June. The number of unemployed persons, at 11.3 million, was also little changed over the month; however, unemployment has decreased by 522,000 since June. (See table A-1.)
(…)
Total nonfarm payroll employment increased by 148,000 in September, with gains in construction, wholesale trade, and transportation and warehousing. Over the prior 12 months, employment growth averaged 185,000 per month. (See table B-1.)
Employment in construction rose by 20,000 in September, after showing little change over the prior 6 months.
Employment in wholesale trade rose by 16,000 in September. Over the prior 12 months, this industry added an average of 7,000 jobs per month.
Transportation and warehousing added 23,000 jobs in September. Most of the increase occurred in transit and ground passenger transportation (+18,000).
In September, employment in professional and business services continued to expand (+32,000). Over the prior 12 months, employment growth in this industry averaged 52,000 per month. Employment in temporary help services continued to trend up in September (+20,000).
Within retail trade, job gains occurred in building material and garden supply stores (+5,000) and in automobile dealers (+4,000). In the financial activities industry, employment in credit intermediation and related activities declined by 8,000 in September.
Employment in health care changed little (+7,000) in September. Thus far in 2013, health care has added an average of 19,000 jobs per month, compared with an average
monthly increase of 27,000 in 2012.Within leisure and hospitality, employment in food services and drinking places was essentially unchanged over the month (-7,000). Job growth in this industry averaged 28,000 per month over the prior 12 months.
Employment in other major industries, including mining and logging, manufacturing, information, and government, showed little change in September.
(…)
The change in total nonfarm payroll employment for July was revised from +104,000 to +89,000, and the change for August was revised from +169,000 to +193,000. With these revisions, employment gains in July and August combined were 9,000 more than previously reported.
Counterbalancing out all of this news is the fact that 136,000 people left the workforce in September, a number nearly equal to the number of net jobs added and which mostly explains the slight dip in the overall unemployment rate itself. More broadly, though, the U-6 unemployment rate remains high at 13.6% and the labor force participation rate remains low at 63.2%. Overall, the average jobs creation rate over the past year is at 185,000 net jobs per month. However, as economist Justin Wollers points out, that average has been declining from an average of 209,000 in the last quarter of 2012 and 207,000 in the 1st quarter of 2013, to 182,000 in the second quarter of the year and (pending revisions for August and September) 143,000 for the third quarter of the year. That’s a worrisome trend, and the impact of the government shutdown is only likely to make the final quarter of the year even more disappointing.
As CNBC notes, this is a largely disappointing result:
“Today’s blistering jobs report has quickly reminded America that our economic problems are getting worse, despite talking point reassurances from Federal Reserve officials,” said Todd Schoenberger, managing partner at LandColt Capital.
The report likely will do little to move the needle on monetary policy.
Most market-watchers now expect the Federal Reserve to continue its $85 billion a month bond-buying program until well into 2014. Consensus sentiment is now that the central bank won’t even start easing back on, or “tapering,” the purchases until the spring.
(Read more: Thanks, Congress: Data delay means no Fed taper)
The September report provided another reminder that while the jobs market continues to heal it is far from robust.
The bulk of the jobs came from professional and business services, which added 32,000 positions, while there were 20,000 more temporary jobs. Transportation and warehousing rose by 23,000, and there were 20,000 additional construction positions.
One of the strongest areas of job creation over the past several years, leisure and hospitality, lost 7,000 jobs for the month.
Another point worth keeping in mind is that this is likely the last jobs report we’ll see for a few months that won’t be impacted in some way by the government shutdown:
While many economists now believe the slowing of monetary stimulus will happen in December, they also acknowledge that the shutdown has muddied the data Fed officials use make that timing decision, which may end up delaying the Fed’s plans.
“The Fed’s core criteria to change policy is clear evidence of a sustained improvement in the labor market outlook,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note to clients. “Such evidence will not be available this year” because the shutdown depressed employment in October and then likely caused a corresponding bounce back in November.
The next “clean” report — that is, a jobs snapshot not affected by the whiplash of a federal government shutdown and reopening – won’t come until January 2014, when hiring data for December will be released. As a result, Mr. Shepherdson predicted, this data disruption will force the Federal Reserve to hold off any reduction in its stimulus efforts till next year.
By that time Janet L. Yellen, the president’s pick to succeed Mr. Bernanke when his chairmanship ends on Jan. 31, may be at the head of the central bank. She is widely expected to continue the policies set in place by Mr. Bernanke.
It’s quite probable that Yellen may push the Fed to delay tapering if the numbers keep up like this. After all, this is hardly the type of jobs report that indicates that we’re anywhere near having a healthy economy, and other events in Washington are just likely to increase economic uncertainty in the months going forward.
I’d like to suggest an alternate story line, and one which might be challenging to laissez-faire market boosters.
Since we talked economic here at OTB, Robert Shiller, a markets skeptic won a Nobel(ish) Prize.
The good bits:
Again…you, and the rest of the Republicans, are getting the exact employment market you want…so why exactly are you dissappointed???
@C. Clavin:
Doug actually believes that with “less government and less regulation” the markets will self-regulate and bring everyone happiness.
The Shiller stuff above says no, there is a lot of psychology going on, and markets are not finding any optimal results. It is, like history, just one thing after another.
Oh my god, only 90% of the expected 180,000 net new jobs? I think we need to all in on austerity policies and get that net new jobs rate down to zero.
Well…in all fairness…Doug isn’t the only one who has bought into that delusional mythology.
But by now you would think that anyone with half-a-brain would be able to admit it is plainly nonsense. Republican economic theories have proven themselves to be failures. It’s time to move on.
The best proof that Republican economic theories are total bunk is that when in office…they themselves refuse to see them through. And Congress…when confronted with the opportunity to pass specific bills that are along the lines of their abstract theories…refuse.
@C. Clavin:
Shiller is an interesting guy. He defends finance and banking more than a leftist would, but he definitely supports government intervention to support fairness more than a rightest would:
Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism
This is like saying people can’t possibly catch a ball because they don’t know the formula for the trajectory of a projectile. The claim was never that people are consciously making present value calculations; it was that their intuitive processes approximates a present value calculation in much the same way the part of are brain that deals with moving objects intuitively approximates the equations of motions.
@C. Clavin:
Frankly , it is difficult to understand how a highly intelligent guy like Doug is disappointed, given that the Republicans have for the past three years delivered exactly the kind of “deficit reducing”, government shrinking economic program that Doug and his economic gurus at the Heritage Foundation and Reason.org wanted. Perhaps he is disappointed that this program did not result in the surge of economic growth and employment that the right wing economists predicted?
Maybe it’s time for him to realize that right wing economic theories have been discredited and dis-proven in the same way as say, creationism and phlogiston theory .But hey, look! Krugman is shrill. That’s what’s important.
@Stormy Dragon:
In the beginning, rational men said “most market participants are like me, rational men.”
That held up for a while, but it rapidly became clear that not everyone was rational, that there was glaring speculation and market gambling going on.
So the second defense was “well, if people are not rational like me, markets at least average things out, and in aggregate act as if they were.”
That held up for a while too, though it should not have done. There was other glaring evidence that markets in aggregate do also act irrationally, with bubbles and crashes.
Shiller’s book length treatment on this is “Irrational Exuberance” and I recommend it highly. (I actually had the good experience of reading it as I traded startup options across the top of the dot-com bubble. It was extremely valuable then.)
If you’d like a more mathematical perspective on the strangeness of markets, I recommend “The Misbehavior of Markets” by Benoit Mandelbrot. You can’t beat Mandelbrot for math cred.
@Stormy Dragon:
(Maybe I misunderstood your comment. I agree that humans have great math skills, and intuitive skills, but the lessons of Mandelbrot, Shiller, and even Taleb, is that despite that we can’t ever leave emotion behind. We are emotional creatures as well. Or as Barry Ritholtz reminds us, “pants wearing monkeys” trying to win at the stock market.)
[update: add the work of Richard Thaler (@R_Thaler) to that list.]
@john personna: Markets, like democracy itself, require perfect information – perfectly distributed and purely rational actors in order to require no regulation. This fact is often ignored by Libertarians.
@Tony W:
Exactly. Markets and democracies are “least bad” solutions, far better than dictators or commissars, but far from perfect by themselves.
@john personna:
I’m not disputing the usefulness of using psychology to improve our understanding of what our intuitive economic reactions are. I was disputing Shiller’s characterization of classical theory, which grossly misrepresents what they were arguing.
@Stormy Dragon:
I can only say that since I’ve become interested in this I’ve read 15-20 books on economics, brains, and brains on economics.
I believe you are wrong.
See also The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street, by Justin Fox.
[Update: What you are saying might be close to the “last defense” of some who had early bad ideas. Fox’s book does a good history on the moving goalposts over the years.]
Indeed. When Reagan faced an economic contraction he discarded the Laffer theories that tax cuts were by themselves sufficient for economic growth and instituted a surge of government spending in 1982 followed by tax INCREASES in 1983 and 1984. That delivered the “Morning in America” economy that drove his 1984 re-election. That’s not how the right wing mythologists remember it, however. They remember it as:
1981 Tax cuts
1982 ??
1983 ??
1984 Growth!!
The problem here is that the believers in right wing mythology aren’t just a harmless fringe group: they’re in Congress, blighting the dreams and hopes of middle class and working people with their discredited theories. Its like if believers that bad air causes infections were in charge of our medical policy.
@john personna:
I’m wrong for agreeing with Schiller?
@Stormy Dragon:
@john personna:
Okay, so show me where classical economists claimed people were conciously and deliberately calculating present value functions, as Shiller claimed they did in the interview?
The guy is right in terms of his economic conclusions, but he was still making a ridiculous strawman argument in that interview.
@Stormy Dragon:
I have given you several book length treatments. As I say, Fox documents the changing claims.
@Stormy Dragon:
I interpreted Shiller to be saying that we (people) are not always the highly rational economic beings that classical economics suggests.
I did not see it as the straw man that you did. There is now a whole field of economics – behavioral economics – dedicated to examining the psychological motivations and decision-making processes that are behind our economic activity.
@al-Ameda:
Which I agree with. But there’s a difference between saying that and saying “The economists who came up with this theory said everybody in the markets was doing calculations, present-value calculations”.
@Stormy Dragon:
Dude. Numeric economics did not start or end with present-value calculations. They are a (strange) branch. Mandelbrot proves them numerically wrong. Taleb explains that black swans are often the cause. Thaler and Shiller overlay human emotional tides.
Fox actually starts much earlier, with Charles Dow himself, and builds from there.
@john personna:
Here’s what this conversation is like:
Shiller: Diabetics shouldn’t eat candy because Hitler liked candy.
Stormy: I agree diabetics shouldn’t eat candy, but the Hitler thing is just bizarre.
John Personna: Lots of medical experts have written books about why excess sugar consumption is bad for diabetics. Why are you being so anti-semetic?
(In the hypothetical case of an absolutely secure bond in an absolutely stable currency, one can calculate net present value. With changing interest rates or changing rates of inflation that becomes impossible. Traded instruments, with market fluctuations, are right out the window.
Whether humans can ballpark the theoretical secure bond / stable currency result matters little, because one of the key and reproducible findings of behavioral economics is that humans suffer hyperbolic discounting.)
@Stormy Dragon:
Where are you getting your vision of what Shiller believes?
I don’t think you’ve read any of his books. Have you read a full interview or watched a whole video lecture?
(It is absolutely true that economics bought for a time “strong” versions of the Efficient Market Hypothesis. It’s true that theorists know that “strong” forms are bunk, and “weak” forms tend these days to be retreating defense from behavioral findings.
It is absolutely true that when Shiller started his work, believe in strong EMH was much more widespread, and he was fighting that.
For reals.)
@john personna:
I’m not commenting on what he believes. I’m commenting on something he said in that interview, which was wrong (“candy is bad because Hitler liked candy”) even if the conclusions in his other work (“diabetics shouldn’t eat candy”) is something I agree with. Giving more and more information about the links between sugar and diabetes doesn’t change the fact the thing he said in the interview is a fallicious argument.
Likewise, it doesn’t matter how correct behavioral economics is, “The economists who came up with this theory said everybody in the markets was doing calculations, present-value calculations” is still a ridiculous claim. No classical economist ever argued people were literally sitting down and calculating present value every time they try to decide how valuable something is. Classical economists were wrong, but not for the stated reason, so it was a bizarre thing to say in an interview.
@Stormy Dragon:
So, I’ve read this book length history on “The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street,” which started with Charles Dow, and worked forward through Eugene Fama and to Richard Shiller.
I think that book described early days very much like what Shiller tries to distill there to a lay audience.
I notice that Wikipedia has this:
In the 1960s, when strong EMH was in vogue, wouldn’t people need to be doing efficient present-value calculations?
(As I say, some of those 60’s thinkers are making retreating arguments, and the ones they make today are not the same ones they made then.)
@john personna:
No more than I need to be doing calculus to fall off a building properly. We know, thanks to Einstein, that Newton’s law of gravity is wrong. It would still be bizarre for, say, Stephen Hawking to give an interview where he said something like, “Newton’s law of gravity was wrong; most people don’t even know what an integral is”.
@Stormy Dragon:
Huh? The strong EMH says not only that prices move randomly but:
To reflect all information, public and private, someone must be doing a net present value calculation.
Are you suggesting a hocus-pocus where people just “feel” a value reflecting all information, public and private?
BTW, the key error in strong form EMH was this claim:
They never got that there might be other reasons no one could earn excess returns over a long period of time.
You might for instance have a random market, with random emotional swings, without share prices reflecting all information, public and private.
Actually “reflect” is a softer word than was used in the 70’s. It was stated then that markets “incorporated” all information, public and private.
@john personna:
No, because if you were actually reading what I’m writing, I’m not defending EMH. AS I’VE REPEATED NUMEROUS TIMES, I AGREE WITH THE BEHAVIORAL ECONOMISTS.
@Stormy Dragon:
No matter how much you shout, or invoke Hitler, or sugar, you are caught.
You are talking about the strong from EMH, because Shiler was talking about the strong form EMH:
I mean, he called it out, right there directly.
Written back in 2009, from a review of Fox’s “Myth” mentioned above:
@Stormy Dragon: @john personna:
Look, with all due respect, you guys are getting pretty deep in the weeds here. Bottom line, the “rational expectations/efficient market” theory has been dis-proven by the events of 2008. We tried the idea of self-regulating financial markets and it blew up in our face in 2008-just like it did in 1929.( The conservatives learned nothing from that blowup either).
Between 2008 and 2012 the conservatives argued that financial stimulus would lead to hyperinflation by now. Wrong again, bob. Read Krugtron the Invincible on that .
The conservatives also argued that if debt grew too much, this would reduce employment, and that as a corollary, if we reduced the deficit, the economy would grow . Turns out they couldn’t do math.
In short, the conservatives have been wrong about everything. Now it would be nice if Doug and other conservatives would just recognize that their theories have been proven wrong and that the failed austerity policy has a lot with do with why the economy is “disappointing.”. But no, conservative economics cannot fail. It can only be failed. So what’s wrong is not that the Republicans are screwing up the economy with their austerity program. No, what’s wrong is that the economy is somehow experiencing “disappointing” growth, most likely through something the Obama Administration is or is not doing.
@john personna: THe only people who believe in the Strong Market hypothesis are economists who have never stepped outside the academic world and never bought anything. They’re the sort of idiots who think there’s no problem with insider trading.
@stonetools:
Those of us who read Shiller in 2000 didn’t need to wait until 2008, but yes.
@grumpy realist:
One wonders how early EMH hypothesists wrote off US 1929, or the classic tulip bubble.
@this:
Dear idiot downvoter, you don’t really understand enough economics to know what is bothering you, do you?
Wow. This thread got way down in the weeds with market theory. Whatever happened to buy low sell high? That’s probably best sums up most layman investor strategies.
@Pharoah Narim:
It’s the weeds, but it is the current Nobel, and that Nobel work ties directly to the right/left split on economics.
The far right likes to thumbnail “free markets” as both efficient and beneficial for all Americans.
Shiller would agree that markets are mostly efficient and mostly beneficial, but they fall down too. Not only do they boom and crash, they are capricious with their gifts. Markets are not there to insure that every hard working American succeeds and profits. Luck matters.
Of course, if you are an idiot extremist, you can just downvote uncomfortable truths.
@john personna:
I don’t think you’re being downvoted by an idiot extremist. You’re likely being downvoted for your reaction to Stormy, who never asserted that Shiller was wrong about efficient market theory. He simply thought Shiller’s comment in the interview was simplistic and exaggerated. You haven’t really shown that to be wrong (it might be, but we would need to actually see what the efficient markets proponents said when as you put it strong EMT was in vogue). Instead of showing that, you’ve gone on and on about how Shiller was right… and he was! No one disputes this.
The whole argument is actually really dumb. Two smart people arguing over something that doesn’t really matter. Well done.
@Rob in CT:
He misrepresented Shiller:
I was calling him on that “grossly misrepresents.”
@Rob in CT:
You know, there is this classic thing that happens when you are arguing with a troll. You’ll say “NASA acknowledges climate change, why don’t you?” And they’ll say, “I don’t care about NASA, you have to prove it to me here, now, in a few column inches, or I’ll just stick with what I think.”
Stormy is wrong. Fox offers a book length treatment on that. But if I can’t prove it in a few column inches then Shiller was “grossly misrepresenting.”
Right?
I dismiss trolls who after I drop ten links to supporting data offer nothing themselves but their on leaden insistence.
(A sane and fair man would have said, “I suppose I should put Fox on my reading list, because it was certainly not my impression that early EMH supporters were as extreme as this.”)
[or he would have offered some links of his own, to support HIS case.]
@john personna:
I’ll have to take your word for it, John. I haven’t read Fox. I see his book is $10 on kindle. But then, I already think he’s right, so I’m not sure I care to read it just to figure out whether you are right that Stormy is wrong that Shiller exaggerated the original claims of EMH proponents. You know?
@Rob in CT:
Here’s what I try to do: If I believe “A” and someone says they read a book, “not A”, I at least downgrade my confidence. I maybe hold onto some of my opinion, but less strongly.
If I’m interested and not lazy, I’ll google the author and reviews. If you read 3 reviews you generally get an idea what is liked and hated about a work.
If you can find it cheap or at the library, I think it is worth it to anyone interested in political economy, banking oversight, Wall Street regulation, and as a bonus will help you with your portfolio.
… or just google up some long-form reviews.
@john personna: I don’t know the specifics about your claims about Shiller, or Shiller’s own claims, but if you’d say that
then you’re not above using a very, very broad brush.
@Pinky:
In that line I was stating my opinion/recollection of arguments I’ve read here at OTB.
Have you ever heard the argument “if we just had a free market in healthcare, everything would be cheaper?”
That’s an example.
There have also been a set of claims about unemployment, that unrelated markets just naturally hire everyone.
Or for that matter “just privatize Social Security, and everyone will be fine.”
In the 5th year of President Obama’s “lightning strike” against unemployment, the jobs picture is still “unexpectedly disappointing.”
@john425:
So much fail in one sentence!
1. Disregard of the greatest recession since 1929.
2. Disregard of limited action by government.
3. Disregard that Obama’s foes blocked more action.
4. Disregard that any recovery is better than nothing.
5. Disregard that more could have been done, but see 1,2,3,4
Complain that not everything is roses, ta-da!
@john425:
Yes it’s true, if you ignore the fact that nearly $18 trillion in income and wealth was vaporized (nearly 25% of total wealth of Americans) in the 2008 crash of the financial and housing markets, then it’s very easy to dismiss our steady economic growth since 2009, and the slow decline in the unemployment rate from over 10% to about 7%. Only delusional fools believed that we’d be back to normal 5 years after the worst economic disaster since 1929.