The September employment report just came out today and the numbers are horrible. The US added only 142,000 jobs last month. This is much lower than the 200,000 jobs, which was the consensus estimate. Also the August report was lowered to only 136,000 new jobs. The monthly minimum number of new jobs that economists quote as necessary just to keep up with population growth is 150,000. We did not even get that.
The numbers of those Americans over age 16 and not in the labor force has reached a record high of 94.6 million. Labor force participation has dropped to 62.4%, a level that we have not seen since October 1977. The unemployment rate, U3, remained unchanged at 5.1%, but this was from another 350,000 Americans leaving the workforce. If you look at the real-world unemployment rate as reported from Shadow Government Statistics, which uses the same methodology the Bureau of Labor Statistics used during the Carter Administration, the unemployment rate is flat at 22.9%.
The diffusion index, measures the number of industries that are adding jobs to those eliminating them. The lower the number, the more weakness in the job market. It ended September at 52.9, down from 61.4 a year ago. This also was the worst reading since February 2010.
Challenger, Gray & Christmas, Inc. is a staffing company that complies layoff statistics on a monthly basis. The September numbers totaled 58,877, a 43% increase from the prior month. While this amount was down from July, the average trend is increasing, a phenomenon that has occurred for the last couple of years. This past quarter was the second highest job cuts since the Great Recession.
The cuts are also hitting across different segments of the economy. A few months ago, energy was the sector that was hit the most. Today, the computer industry (Hewlett-Packard), retail and automotive are the most hit. The announced layoffs are indicators of future economic weakness. Heck, even Wal-Mart announced it was cutting staff from its Bentonville, Arkansas headquarters as they also cut their outlook for the year. Whole foods announced Monday it is laying off 1,500 people. Sprint is looking at cutting $2.5 billion in expenses, which could impact some of their employees. Target laid off 1,700 employees at its Minneapolis headquarters and plans to cut another 2,000 jobs in the next two years.
All this weakness in the job market does not bode well for raising interest rates. The possibility of an increase in October is low, and this trend will continue throughout the end of the year and well into 2016.
The interesting thing is if our economy is so healthy, why do we not see the job growth?