Unemployment Rate Drops, But Job Growth Remains Disappointing

By October 5, 2012Economy

The unemployment dropped unexpectedly from 8.1 percent in August to 7.8 percent in September, according to the Bureau of Labor Statistics (BLS). The unemployment rate stems from a survey of households, and there was a large jump in the number of employed individuals (up from 142.1 million in August to 143.0 million). With such a large increase, the unemployment rate fell. These numbers are often volatile. Time will tell if these numbers hold when the October numbers are released on November 2. We might expect for the unemployment rate to go back over 8 percent at that time.

Monthly employment changes come from a different survey of business establishments. Using this survey, significant revisions to the July and August data were behind the improvement. As you can see in the attached graphic, July’s nonfarm payrolls rose from 141,000 as they were originally reported to 181,000 according to the revision. August’s nonfarm payrolls were upgraded from 96,000 to 142,000. This suggests an increase of 86,000 workers more than originally stated. For manufacturers, the revisions show that the sector lost more jobs in July and August than we thought, with the industry adding 18,000 workers in July (instead of 23,000) and shedding 22,000 workers in August (instead of 15,000).

The larger narrative about the current state of the economy has not been altered by the lower unemployment rate. In fact, there were just 114,000 nonfarm payroll workers added in September, continuing a disappointing streak of job creation since the spring. Manufacturing lost 16,000 workers, bringing its two-month losses to 38,000 employees. With manufacturers being one of the primary drivers of growth since the end of the recession, it is hard to argue that today’s employment numbers point to strength in the current economic environment.

Looking specifically at sectors within the manufacturing industry, durable goods businesses were hit harder in September than nondurables, with both of them seeing declines (down 13,000 and 3,000, respectively). Sectors with the largest declines included computer and electronic products (down 5,500), primary metals (down 3,400), printing and related support activities (down 3,200), transportation (down 3,000, with 3,400 from motor vehicles), and miscellaneous manufacturing (down 1,500). On the other hand, there was growth in the following sectors: wood products (up 1,700), chemicals (up 1,600), and food manufacturing (up 600), along with a few others.

Despite the lower employment numbers overall, manufacturing workers did have a slight uptick in the average workweek, up from 40.5 hours to 40.6 hours (mainly from durable goods sectors). The average amount of overtime was the same at 3.2 hours. Likewise, the average weekly earnings for manufacturing workers rose from $971.60 to $976.02.

In conclusion, the employment numbers provide mixed news. While there were upward revisions to nonfarm payrolls in July and August and increased overall employment in September, the larger story is one of continued weakness. U.S. job growth has been dismal since February, and manufacturers’ employment has declined for two months in a row. With slowing global growth and uncertainties about the domestic fiscal situation paramount in many minds, the prospects for future growth in the economy are shaky at best.

Chad Moutray is chief economist, National Association of Manufacturers. 

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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