The U.S. economy lost a further 263K jobs in September, while the unemployment rate rose modestly to 9.8%.
- The sharp benchmark revisions of -824K to the previously report numbers suggests that the U.S. labour market is in far worse sharp than previously thought.
- This was undoubtedly a very weak report, and it indicates that the lingering impact of the U.S. economic recession is continuing to reverberate in the labour market.
The situation in the U.S. labour market appears to be far worse than expected by the market, with the economy reported to have lost a further 263K jobs in September, bringing the number of jobs lost in the U.S. economy to 7.2 million. September's losses were worse than the more modest 175K job loss forecasted during the month, and was also worse than the 201K jobs lost in August (revised from -216K). The sting in this report was the annual benchmark revisions, totalling a staggering -824K, the biggest revisions seen for some time, suggesting that labour market conditions were far worse than previously estimated by the BLS, and this will not appear in the data until January 2010.
The unemployment rate also increased to 9.8% from 9.7%, and the labour force participation rate is now at its lowest level since mid-1986, suggesting disenchanted workers continue to leave the labour force. Further evidence of labour market weakness can be seen in earnings, which rose by a meagre 0.1% M/M, down from 0.4% M/M in August. The annual pace of wage growth was also lower, falling to 2.5% M/M from August's 2.6% M/M and now stands at its lowest level in five years. Moreover, aggregate hours worked declined a big 0.5% M/M falling at a more precipitous pace than employment for a significant reduction in labour effort. Looking at the breakdown of the job losses, there were declines in employment in the goods-producing sector (down 116K) and the services-producing sector (down 147K). Total private sector employment was down by 210K, while the public sector lost a further 53K jobs. At the industrial level, there were job losses across the board, with only the acyclical health and education industries (up a meagre 3K) adding jobs in September. The bottom line of this report is simply that the U.S. labour market remains in far worse sharp that hought. However, notwithstanding the abysmal performance of the labour market in September, we continue to believe that the U.S. economic recession is behind us, even though its impact is continuing to be felt in a very big way in the labour market. If anything, we think that this report will dampen expectations for the near-term recovery, which will believe will be tepid at best. All in all, with the labour market remaining a lagging indicator on economic activity, we believe that this report will have emphasised the Fed's judgement to keep policy easy for an extended period.