Why the jobs report has become meaningless
FORTUNE — Employers added 148,000 to their payrolls in September, about 20% less than economists expected and the third smallest monthly increase in the past year. But the unemployment rate dropped to 7.2%, which is the lowest level in nearly five years. And the number of people actively looking for work was up, meaning people are more optimistic about their prospects for finding work.
What does that all add up to? You got me.
Makings sense of the monthly jobs reports is never easy. It’s generally a noisy mess of numbers cobbled together from two surveys. People like it because it is quick (except for this time around, thanks shutdown), usually coming out the first friday of the new month. But it’s a mess.
That’s been particularly true in the last few months. This month’s jobs report also showed that employers added 172,000 workers in June, which wasn’t that bad of a number. In July, the number was 89,000. August was a strong 193,000. We are, as you can see, just bouncing around.
The details from this month’s reports aren’t any more telling. There was no big jump in employment in any one area of the economy. Restaurants and bars, which had consistently hired workers for most of the recession, collectively reduced their employment last month. But it was only by 7,100 jobs, and the work isn’t generally the highest paying anyway. Construction jobs, on the other hand, were up. But a recent report showed that home sales were down.
The category that showed the biggest jump in employment in September was temporary workers, up 20,200 jobs. That’s typically a good sign, because temporary work usually is a leading indicator of job growth, as more companies dip their toes in the hiring waters. That being said, it’s hard to get that excited about more people finding temporary work. And if that’s the only place companies are hiring, that’s a problem.
What’s more, the jobs report is only going to get more meaningless over the next few months. Expectations are for October’s employment report to indicate that the economy only added 100,000 jobs this month. But much of the drop-off will be due to the government shutdown. Ironically, the government shutdown probably didn’t slow the economy that much. But because hiring has been so slow overall, the drop in government workers will make a huge dent in the report.
And it’s not just October that the shutdown will affect. November is likely to see a big increase, again because of government workers reentering the workforce. So expect that report to be dismissed as well. After that we are into December and the holiday hiring season. December has routinely showed big jumps in hiring that haven’t been sustainable. So that report is out too.
But perhaps the most telling sign the jobs report has become meaningless is that the market, that overreactive, hyperactive interpreter of all things economic, no longer seems to care about the jobs report. Despite the big miss on the payroll employment number in September, stocks were rising Tuesday morning. The Dow Jones industrial average was up 100 points an hour after the market opened.
Business cycles only last so long, even if they are weak. And corporate profits are slowing, up just 2.3% on average for companies that have reported their third quarter, according to Thomson Reuters. So if the economy doesn’t pick up soon, the recovery could run out of steam even before it feels like we actually recovered. This could strand the still more than 11 million people who would like jobs but can’t find them, leaving them out of work through another recession. So in reality, the fact that the jobs report is sending such mixed signals this long after the recession ended is pretty bad news. Not that anyone seems to care.