The September Employment Situation Summary (100512): 7.8% Unemployment, 114K Job Adds

Econ news roundup:

• Both Institute for Supply Management indices for September came in with improvements earlier this week. ISM’s Manufacturing Index, moving from 49.6% ti 51.5%, went into expansion after three months of tiny contraction. The Non Manufacturing Index (far more important, as it’s more than 80% of the economy) went into stronger expansion, moving from 53.7% to 55.1%. Both indices oddly saw order backlog contract while new orders increased.
• Car sales for September were up by 13% over September 2011. Toyota (+49K, up 41%), Honda (+28K, up 31%), accounted for 57% of the 135,000 year-over-year increase in unit volume. As to Detroit’s Big Three, Chrysler was up 11.5%, while Ford and GM were flat.
• ADP’s employment report showed 162,000 private-sector jobs added in September, but 29,000 in combined downward revisions to July and August.
• Weekly initial unemployment claims came in at 367,000, a bit higher than the previous week, and will exceed the previous week by even more after they’re almost certainly revised up next week.
• Yesterday, August factory orders, mirroring the disastrous durable goods news from the previous week (down 13.3%), fell 5.2%, beating expectations of 5.9%.

Overall, the picture is of a mostly awful August followed by a somewhat improving September.

Predictions:

• The Associated Press carries a prediction of 111,000 jobs added and the unemployment rate ticking up to 8.2%.
• Bloomberg has a prediction of +115K and 8.2%.
• Reuters has +113k and 8.2%.

The Raw (Not Seasonally Adjusted) Numbers:

Readers here know that I look at what actually happened in the raw (not seasonally adjusted) numbers to get a gauge on where the job market is really going. Here is the layout of the past eleven years:

September is a quirky month. Overall employment usually rises because of teachers and other school workers returning from having the summer off, while the private sector goes the other way because seasonal workers are let go. The seasonal conversions in September are in my view especially vulnerable to not reflecting the underlying job-market realities.

My take is that overall employment before seasonal adjustment needs to increase by at least 750,000 and the private sector change has to be 300,000 or fewer jobs lost to lend any credibility at all to a narrative of improvement. Those seem to be aggressive numbers, but for heaven’s sake it’s the 39th month after the recession ended, and it’s no time to grade on a curve.

The report will be here at 8:30 a.m.

HERE IT IS — Below 8%, with still-small job growth (a distinct stench has been detected):

The unemployment rate decreased to 7.8 percent in September, and total nonfarm payroll employment rose by 114,000, the U.S. Bureau of Labor Statistics reported today. Employment increased in health care and in transportation and warehousing but changed little in most other major industries.

Household Survey Data

The unemployment rate declined by 0.3 percentage point to 7.8 percent in September. For the first 8 months of the year, the rate held within a narrow range of 8.1 and 8.3 percent. The number of unemployed persons, at 12.1 million, decreased by 456,000 in September.

… Total employment rose by 873,000 in September, following 3 months of little change. The employment-population ratio increased by 0.4 percentage point to 58.7 percent, after edging down in the prior 2 months.

… Establishment Survey Data

Total nonfarm payroll employment increased by 114,000 in September. In 2012, employment growth has averaged 146,000 per month, compared with an average monthly gain of 153,000 in 2011. In September, employment rose in health care and in transportation and warehousing. (See table B-1.)

The change in total nonfarm payroll employment for July was revised from +141,000 to +181,000, and the change for August was revised from +96,000 to +142,000.

Well, it will be hosannas for having the rate go below 8%, but the seasonally adjusted job adds, pending a look at the raw numbers, are NOT impressive (edited for this mistake at about 11:30 a.m.), and are on a downward trajectory compared to the upwardly revised July and August.

The big number of job adds in the Household survey would only seems to make sense if about 700,000 people (seasonally adjusted, remember) all of a sudden decided to become self-employed. Really?

More later.

UPDATE: GO HERE.