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10 07 2016 | by Victor Xing | Economics

September Payrolls: signs of tighter labor market slack

The September Payrolls came in at a decent 156K vs. 172K consensus with prior two months revised 7K lower.  The U3 unemployment rate rose to 5.0% thanks to higher labor force participation, but hourly earnings grew less than expected.  Rather than challenging entrenched views across the policy spectrum, elements in the latest report would support arguments by both hawks and doves, and the absence of a “decisive” reading means a December rate hike followed by a shallow rate path remained the most likely outcome.

September Payrolls

The latest jobs report at 156K vs. 172K consensus (-7K prior two months revision) came with another up-tick in the labor force participation rate (both headline and prime age cohort), which pushed U3 unemployment rate to 5.0% from 4.9%.  U6 remained unchanged at 9.7%, and involuntary part-time workers as a percentage of labor force declined to 3.69%:

September Payrolls

Even though signs of diminishing labor market slack appear optically hawkish, they have instead acted as catalyst for a “dovish hold,” as Chair Yellen highlighted during the September FOMC press conference: “and the economy has shown evidence that there are more people who are being attracted back into the labor force. So, in that sense, I would characterize it as, we found the economy has a bit more running room.”

Prime age participation rate at 81.5% vs. 81.3% prior, headline participation rate at 62.9% vs. 62.8% prior:

September Payrolls

Average hourly earnings came in at 0.233% MoM (vs. 0.3% survey) and 2.59% YoY (vs. 2.6% consensus):

September Payrolls

Long-term unemployed as a percentage of total unemployed declined to 24.9% vs. 26.1% prior:

September Payrolls

Employment-to-population ratio rose to 59.8 vs. 59.7 prior; Chair Yellen welcomed recent improvements in the sector:

Now, we were not really certain that this is something that would happen as the labor market strengthened, and it’s good to see that development has taken place.

September Payrolls

One area that has received little attention is the number of workers holding multiple jobs.  The rise in multiple job holders can be interpreted as a sign of economic distress, especially those who work full time at a primary job and part-time at a secondary job (short-fall in income to meet obligations).  Even though policymakers have not focused on this sector, it still warrants further analysis.  “Doing whatever it takes” is not only an expression by central bank policymakers, but also economic participants faced with unpaid bills.  “All available measures” means taking on two jobs to make ends meet.

September Payrolls

Next article09 21 2016 | by Victor Xing | Central Banks

September FOMC: cautious hold