Details of September Jobs Report Disappoint

By Dr. Sam Chandan

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Last Friday’s employment report surpassed economists’ baseline expectations but still fell woefully short in bolstering confidence that we are on the cusp of a more robust jobs recovery. Private employers expanded payrolls by 137,000 jobs in September, more than offsetting the anticipated drag from cutbacks in government employment. The private tally included approximately 45,000 Verizon workers who had been on strike the prior month. Controlling for their impact on the headline number, private employment increased by a more modest 92,000 jobs.

Dissecting the aggregate result, net gains in September employment were concentrated in education and health care and temporary help. The formers sectors have been the primary drivers of private sector job growth during the recovery, reflecting demographic trends. The increase in temporary help is often viewed as a leading indicator of permanent employment in administrative services, but in this case also reflects firms’ current hesitancy in making long-term commitments. Discounting the potential benefits of the proposed federal jobs act, private hiring will remain weak until European and domestic policy conflicts normalize, supporting a rise in business confidence and stable access to credit.

Commercial Construction Gains

Upside gains were reported in non-residential construction, consistent with a recent uptick in commercial construction spending. 23,900 jobs were added across non-residential construction and non-residential specialty contracting. The residential sector continued to languish, reporting a net decline across construction and specialty trades.

Electronics Retailers Cut Back; Apparel Expands

Retailers added 13,600 net new jobs in September, reflecting cuts at electronics stores and small gains in apparel and general merchandise stores. Excluding auto sales, retail spending has improved only slightly over the last year. As of August, the largest year-over-year gains in sales were reported by online and non-store retailers. September’s advance report, due this Friday, October 14, is expected to show a slightly improvement in spending.

Disappointing Office-Using Trends

For investors and lenders in the office sector, the frustratingly slow of pace of improvement in professional employment contrasts sharply with sustained price improvements for core assets. Roughly half the increase in Professional and Business Services employment was in administrative and support roles; most of that increase was in temporary employment. Financial activities employment contracted again in September, falling by 8,000 jobs. The sector is expected to come under further pressure in the coming months, pending layoffs at major financial institutions.

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