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Participation Rate Falls to 38-Year Low

Amongst the other bad news in today’s September Labor report (i.e., payrolls up 142,000 vs. expectations of 200,000 and downward revisions to prior months totaling 59,000), comes word that the labor force participation rate fell to the lowest level since 1977 (i.e., less than half-way through the decades-long transition of women entering the workforce).

Interestingly, according to the household survey, while the civilian population rose by 229,000 last month, some 579,000 people were counted as no longer in the labor force with only 23,000 of them still wanting a job.

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Wage Growth Highest Since 2009

One of the many positive bits of data from Friday’s labor report was that average hourly earnings jumped 0.3 percent from April to May and are now 2.3 percent higher from a year ago, the biggest annual gain since 2009. In this item at the Atlanta Fed’s macroblog blog, they find an even more inspired upward trend when looking at the 3-month average.

Naturally, it will be important to see how this plays out over the summer since, in recent years, rising wages have been one of the key missing ingredients to a more robust (and much more interesting, inflation-wise) recovery.

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What a Difference Two Percent Makes?

The chart below from this item at the Wall Street Journal’s Real Time Economics Blog may go a long way in explaining why wages aren’t rising nearly as fast as  they should be, given the tumbling jobless rate and steady rise in non-farm payrolls over the last few years.

While the overall jobless rate is now back to the pre-2008 norm of the low 5 percent range (and, yes, the historically low participation rate has helped push this down), the make-up of that workforce is different enough (i.e., part-time workers for both reasons in the chart above are about one percentage point higher than before the financial crisis) that pressure on wages is much less than it would otherwise be (or so the theory goes).

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A Stinker of a Jobs Report

It’s probably a good thing that financial markets are closed today in observance of the Good Friday holiday as today’s big jobs report miss would no doubt have sent traders into a frenzy of some sort, direction of markets unknown. Now they’ll have the long Easter weekend to think about the implications of the data shown below via this story at CNN/Money.

In addition to falling well short of the consensus estimate of nearly a quarter million new jobs, prior months’ labor market gains were revised downward by 69,000. Also, it’s important to remember employment is a lagging indicator that, now, may be confirming what many other indicators are pointing to – sharply slower growth for the U.S. economy.

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Another Way to Look at the Job Market

Among the Federal Reserve’s dozen or so ways to look at the labor market as they debate monetary policy next week will no doubt be this new alternative found at the Wall Street Journal Economics blog in which the difference between the U3 jobless rate and the U6 gauge of under-employment is charted (recall that U6 includes U3 plus discouraged workers and those stuck in part-time jobs who would like full-time work).

Interestingly, back in January 1994 (the first month that U6 is available), the two components were slightly different. The U3 rate back then – about three years after the 1991 recession – was nearly 12 percent and the U3 rate was 6.6 percent versus, today, when U6 is 11.0 percent and U3 is 5.5 percent.

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