The Labor Department’s unemployment report released Friday showed a loss of 95,000 nonfarm jobs for September, with the unemployment rate unchanged from August at 9.6%.
The government shed 159,000 jobs, with 77,000 of those census workers; only 6,000 census workers remained on the government payroll as of September. Local governments dropped 76,000 jobs, counting both education and non-education positions. The private sector added 64,000 jobs.
Although the unemployment numbers were, according to some analysts, “far worse than expected,” in actuality, according to Doug Roberts, chief investment strategist for Channel Capital Research.com, most of the job losses were anticipated.
“From a market point of view,” Roberts said in a phone interview, “you have to gauge expectations and second-order effects. The market kind of knew that the government number was going to be bad” — census jobs that everyone expected to end — so “even though it looks like it missed by a mile, people knew that essentially it was going to be bad.” Whether the phased-out jobs went this month or next month, those losses were anticipated, “and that’s why you haven’t seen futures really sell off since [the report] came out.”
The private sector, he went on, was “pretty much in [the expected] range,” which “indicates that unemployment isn’t falling off a cliff; there will be no bread lines next month — no Depression-era scenario; unemployment of 20% is not on the horizon.”
That said, Roberts added, the report was not good. “It’s not like we’re making a dent in putting people back to work. In the future, it will mean that more and more of [the long-term unemployed], if there is job growth, will re-enter the [job market and this will raise] the labor rate. This could be the ‘new normal’ unemployment rate.”
According to Ian Shepherdson, chief U.S. economist for High Frequency Economics, the unemployment rate had been expected to rise a tenth, with private payrolls “better than expected.” The surprise, said Shepherdson in analyst’s note, was the drop in government jobs. While the census job losses had been anticipated, “[m]ost of the surprise was in local government, down a huge 76,000; budget pressures biting hard.”
In the private sector, Shepherdson added, declines in manufacturing and construction were offset by gains in leisure, health, transportation, and temp hiring. While there was growth within professional and business services, most of it was from temporary help, and Roberts pointed out that “if your job growth comes from temps—and … health care ... heavily regulated under the new law — that’s not a robust type of situation forming a base for job growth. ... It just means we’re not getting any worse.”
Steve Blitz, senior economist at Majestic Research, in an analyst’s note, had this to say: “The ‘Great Stall’ continues. ... Only 64,000 private sector jobs were created and aside from the usual 24,000 in health care, the rest were either in temporary business services or at restaurants (which is kind of temporary work as well). Thankfully, people who are employed still like to eat out.” The loss of local government employment contracts, he added, were “a sure sign of federal stimulus money falling away.”
After nine consecutive months of growth, said Blitz, “the broad U-6 unemployment rate sits at 17% compared with 17.3% when the year began.” A decade of employment gains, he said, had been wiped out, and he anticipated it taking another decade to get back to pre-recession figures.
Read about August's unemployment rate on AdvisorOne.com.