US September employment numbers look good, but aren’t really

The US Labor Department said the US economy added 110,000 new jobs in September, higher than the 100,000 figure predicted by economists. Also, rather than shedding 4,000 jobs in August as initially estimated, 89,000 new jobs were actually created. The government also revised upwards non-farm payroll figures for July, saying 93,000 jobs were created as opposed to the 68,000 first estimated. However, the overall unemployment rate rose to 4.7% from 4.6%, the highest for a year. If the August initial estimate had been confirmed it would have suggested a sharp slowdown in the economy since the economy has not shed jobs on a monthly basis for four years.

Ironically, the rise in August’s jobs figure was largely due to the previous underestimation of government hiring, particularly of new teachers, of which one might have thought the government would have a clear idea. And the September rise was driven by the services sector, while there was a net loss in jobs in construction and manufacturing industries. Jobs data is a key indicator of the health of the US economy, which has to create about 100,000 jobs a month to replace those lost through retirement and natural attrition. The data coming out does not appear strong and seems to have been prone to large adjustments since the July implosion of the sub-prime market.

To underline the point, at right is an employment chart shared by John Mauldin, Van Hoisington and Lacy Hunt at the end of October.


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