By Paul Gomme and Peter Rupert
The BLS announced that the labor market was pretty flat in September. Employment rose a lean 29,000 while unemployment rate barely changed, from 4.14% to 4.18%. The flatness spanned almost all major sectors, no big gains or losses anywhere. The diffusion index (percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment) sat at 49.0, so a fairly equal balance of increasing and decreasing industries.
The employment gains recorded by the Establishment Survey, 29,000, are considerably lower than the average over the past year. Indeed, by historic standards 29,000 new jobs seems anemic. However, our discussion of the July Employment Report pointed to reasons why the U.S. economy simply doesn’t need to create as many jobs as it once did. Central to that discussion was the notion of “breakeven'” job gains: the number of new jobs that need to be created to leave the unemployment rate unchanged. Two factors have lowered breakeven job gains: a falling labor force participation rate, largely due to an aging population, and slowing population growth. The fact that the unemployment rate rose very slightly, from 4.14% in August to 4.18% in September, suggests that 29,000 is close to breakeven: about what’s needed to hold unemployment steady.
The household survey painted a slightly different picture, with the labor force rising 485,000 and the number employed up by 406,000. The chart below explains who gets counted in the two surveys.
The bottom line: with breakeven this low, headline payroll numbers that once would have signaled a slowdown now look roughly consistent with a stable labor market.
