As Unemployment Hits Fresh Low, Signs That US Economy Is Cooling

The headline numbers trumpet that the unemployment rate is at a 50-year low. But the latest data points show a more mixed picture — not of where we’ve been but where we are going.

Overall, in the United States, according to the latest employment report from the Bureau of Labor Statistics on Friday (Oct. 4), hiring was relatively steady, though the pace has declined to a level not seen since 2012.

Firms added 136,000 jobs last month, and the unemployment rate is now 3.5 percent, where it was last at that level at the end of 1969. The latest tally missed expectations of 145,000 additions.

Now the average job additions stands at 161,000 positions, which marks a slowdown from the 190,000 pace that had marked several years since the end of the recession, and down significantly from the 223,000 pace that had been seen last year.

And we note that that weakening may give pause to reflect on what lies ahead. Data points show a snapshot. But add this jobs report — which shows employment gains that have stretched into 108 months — to the latest ISM data and that shows a slowdown in manufacturing, and the fact that wage growth is anemic (in fact, measured as a monthly tally, wages lost a penny as measured from August to September). The manufacturing sector (11 percent of the workforce) lost 2,000 jobs last month, where last year, as noted by The New York Times, the hiring pace had been 25,000 jobs a month.

For now, at least, hiring has been steady in professional and business services, where the average additions have come in at 35,000 a month through 2019, and healthcare-focused positions grew by 39,000 roles. In a sign of another sector hit by the transition of commerce to digital means, the retail sector lost 11,000 jobs, as brick-and-mortar locations continued to shutter.

Wage growth slowed on an annualized basis to 2.9 percent from 3.2 percent. As has been noted in this space in the past, wage growth remains a key gauge to watch. If firms (across all verticals) find that input costs rise amid the continuing trade war, and wage growth comes amid a tight labor market, eventually price increases will start to show up, which in turn can impact consumer spending. That’s especially true as wage growth needs to be adjusted for inflation (and inflation is inching up toward a nearly 2 percent level).

In all, the Friday data were by no means dismal, but were no blowout, either. The Fed has signaled willingness to cut rates again in in an effort to stimulate the economy, but that tactic has been tried before this year and thus far we see the impact has been … anemic, at least in terms of hiring, and firms are pulling back on investment. The clouds may not be rumbling, not yet, but they are gathering, and darkening just a bit.