156K New Jobs Added To Payrolls, Unemployment Rate At 5%

The September employment report is not that strong and the sigh of relief you hear is coming from the Fed which won't be faced with a pre-election rate hike. Non-farm payrolls rose 156,000, which is at the low end of expectations, while average hourly earnings don't look that inflationary, at least not on a monthly basis which is up only 0.2 percent and again at the low end of expectations.

But there are definitely positives including a rise in the labor participation rate, up 1 tenth to 62.9 percent, which gave a deceptive lift to the unemployment rate that is 1 tenth higher at 5.0 percent. The increasing inclusion of discouraged workers is one of the Fed's policy objectives and the participation rate points to improvement. Another positive is a rise in the workweek, up to 34.4 hours from 34.3 hours with the manufacturing week also slightly higher in what is a positive indication for September industrial production.

Manufacturing employment, however, is one of the weak spots in the report, down 13,000 following August's 16,000 decline. Government payrolls are also a negative, down 11,000 but following a long string of gains. Otherwise the industry breakdown offers mostly good news including a gain for construction, up 23,000 following prior weakness, a 22,000 gain for retail which extends a run of similar gains, and especially a 67,000 rise in professional & business services that includes an outsized gain of 23,000 in temporary help services. This last detail confirms other evidence that employers are having a hard time filling positions.

And there is another positive, and that is movement higher in the year-on-year rate for average hourly earnings, up 2 tenths to 2.6 percent which is still, however, 1 tenth under where it was in July. And with an election coming around, the positives are tame enough. November may be out for a rate hike but today's report will build expectations, at least for now, for a rate hike at the December FOMC.

Recent History Of This Indicator:
Nonfarm payrolls are expected to bounce back but not much to what would nevertheless be a respectable gain of 168,000 in September following August's more moderate 151,000 gain. The unemployment rate is expected to hold steady at 4.9 percent while average hourly earnings, in another sign of strength, are expected to rise 2 tenths to a solid 0.3 percent.