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Where September's Job Gains Came From

By , Contributing Writer, Money Morning •

Where September's Job Gains Came From

The unemployment rate dipped below 6% for the first time in six years, as the U.S. Department of Labor reported today (Friday) that employers added 248,000 new jobs in September. The gains took the unemployment rate down to 5.9% from August's 6.1% and beat consensus estimates of 215,000.

The September jobs report also included sharp upward revisions to the previous two months' figures.

The number of jobs gained in July was revised from 212,000 to 243,000. August figures were revised from 142,000 to 180,000. The strong revisions amounted to an additional 69,000 jobs collectively.

So, where did all these job gains come from?

Here's a breakdown.

September Jobs Report: Where the Gains Came From

  • Higher-paying jobs in the professional and business services added 81,000 jobs, compared with an average gain of 56,000 over the prior 12 months. Management and technical consulting services added 12,000 jobs; architectural and engineering services added 6,000. Employment in legal services, however, declined by 5,000 jobs.
  • The retail sector increased headcount by 35,000. Employment in the retail trade has increased 264,000 over the last 12 months.
  • Food and beverage stores added 20,000 jobs. According to the U.S. Bureau of Labor Statistics (BLS), the jump largely reflects the return of workers to Market Basket, a New England grocery store chain, who were laid off in August amid a strike over wage inequality. Hundreds of full-time workers and as many as 20,000 part timers were idled during the six-week work stoppage.
  • Healthcare added 23,000 jobs, in line with the prior 12-month average gain of 20,000 jobs per month. Employment rose by 7,000 in home healthcare services. Hospitals added 6,000 new jobs.
  • Mining employment rose by 9,000, with the majority of the increase (7,000+) coming from support activities for mining, which include things like taking core samples and making geological observations at prospective sites. Over the year, mining has boosted its employee count by 50,000.

  • Jobs growth in food service and drinking places continued to trend upward, adding 20,000 new positions. Job gains in the sector are up 290,000 over the year.
  • Construction employment added 16,000 jobs. Within the industry, employment in residential building increased by 6,000. Over the year, construction has added 230,000 jobs.
  • The financial services sector added 12,000 jobs, for an increase of 89,000 jobs over the year. Job growth in September occurred in insurance carriers and related activities (up 6,000) and commodity contracts and investments (up 5,000).
  • Showing little job growth change last month were manufacturing, wholesale trade, transportation, warehousing, and government.

The Trouble Lurking Behind September's Job Gains

"It is hard to be pessimistic when the unemployment rate falls below 6% for the first time in more than six years," Steven Pressman, professor of finance and economics at Monmouth University in West Long Branch, N.J., told Money Morning. "It is also hard to be pessimistic when the BLS reports that nearly a quarter of a million jobs were created in September at the same time that they significantly revise upward the job gains from earlier in the summer."

Still, there are wrinkles in what this jobs report says about the U.S. economy.

"A good part of the drop in the unemployment rate resulted from a decline in labor force participation," Pressman said. "The 0.1% drop in labor force participation [the share of the working-age population employed or looking for a job] was responsible for half the decline in the unemployment rate. More telling, according to the household survey, the increase in those not in the labor force (315,000) exceeded the gain in employment (232,000)."

According to a report released Thursday from the Center for American Progress, a progressive think tank, the labor force participation rate (62.7%) has been steadily declining since the end of the Great Recession. and is now as low as it was in the late 1970s.

Stagnant wage growth also remains a concern.

"A strong labor market should be accompanied by rising wages," Pressman continued. "This is basic economics: higher demand for workers should increase wages. However, wages were stagnant in September. Over the past year, wages have grown at a rate of 2%, the U.S. inflation rate. With no real wage growth, it is hard to think that the job market is really strong. And with stagnant wages, it is hard to figure out where the demand is going to come from that will sustain the economy and generate future job growth."

Indeed, although companies across the United States have created some 10 million new jobs from the labor market bottom in 2009, the 2013 median household income was 8% below its pre-recession level, according to a Sept. 13 Census Bureau report.  

The September jobs report is the last before the U.S. Federal Reserve's policy meeting at the end of this month, at which it will end its market-supportive asset-buying program.

Now: We're entering a rising interest rate environment for the first time in 33 years. This is a watershed market event - a shift, really - that will change how you invest. Here are the best investments to make to prepare for rising interest rates.

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