The U.S. labor market continues to make progress and once again shows, without a shadow of a doubt, that the U.S. economy is not in recession. Including upward revisions for August and September, nonfarm payrolls increased 182,000, almost doubling the consensus expected gain of 95,000. Civilian employment, an alternative measure of jobs that factors in small business start-ups, increased 277,000. This gain helped push down the unemployment rate to 9 percent.
A year ago the unemployment rate was 9.7 percent. During this time, nonfarm jobs have grown at an average monthly rate of 152,000 while civilian employment has grown at a rate of 140,000 per month. In other words, we don’t need 150,000 jobs per month just to keep the unemployment rate steady. Because of the aging of the labor force, 150,000 jobs per month is more than enough to push down the jobless rate.
Very quietly, without fanfare, private-sector payrolls have grown by 1.8 million in the past year, while the work week has lengthened and hourly cash wages are up 1.8 percent. Total hours worked are up 1.7 percent in the past year.
9% is not good by any means, but it is about as good as I expected a year ago. What’s really interesting is that this rise in civilian employment has matched and slightly exceeded a supposedly catastrophic decline in government employment. We’re supposed to believe that this “austerity” — which is austerity in these sense that ordering a diet coke with your triple bacon cheeseburger is a diet — hurts employment. According to standard economic multipliers, civilian jobs should grow far less than government jobs decline. Not happening. All the big spenders have left is a frail argument that if we had only maintained our high levels of spending, unemployment would be even lower. It’s this year’s “jobs created or saved”.
What I think is spurring this … well, we can hardly call it growth yet … is partially the gridlock in Washington. It would probably be better if we had serious efforts on tax reform and deficit reduction. But even the extremely modest step of taking out foot off the gas has helped. But a bigger part is that we are deleveraging in the private sector, reducing our credit card and mortgage debt and increasing our savings rate. It may not make for nice numbers in the short run, but it’s a better long-term strategy.