Hip, hip hooray. We have jobs. But the fact that that’s the economic cheer of the day is a bit depressing.
Still, for the first time in months, the most important indicator of where the economy is headed was better than expected. And it showed that we are actually moving farther away from a recession, and not slipping into a slowdown as many had expected. Last month, employers added 103,000 workers to their payrolls. That was much better than in August, when the Labor Department initially said the economy added no jobs that month. That number has since been revised up to 57,000. And if not for recent government cut backs the jobs market would have been even better. Excluding the government, private employers added 137,000 jobs in September.
Nonetheless, the unemployment rate stayed stuck at 9.1%. And many economists said hopes that the number of jobless – which now is about 14 million – would fall anytime soon is fading. In fact, many economists now expect the unemployment rate to rise in the next few months. “There’s nothing in the data to suggest we are shrinking,” says Steve Blitz, senior economist at ITG Investment Research. “But there’s also nothing to suggest higher economic growth either.” Worse, Blitz says when you are bumping along the bottom, any shock, be it more debt problems in Europe, or a slowing in China, can send you into a recession.
The real problem, economists say, is that the rate of job growth is not nearly enough to significantly improve the economy, and will only continue to worsen the economic divide that has lead to Occupy Wall Street and other protests like it. Here’s why:
The economy needs to produce about 200,000 jobs a month to significantly lower the unemployment rate. We got about half of that last month. In fact, it may have been a bit worse than that. Included in the September numbers were the return to work of 45,000 striking Verizon workers. Those weren’t really new hirers. Take them out and the economy only added about 60,000 jobs last month, about a third of what it needs to produce a lower unemployment rate. What’s more, the health care sector added 44,000 jobs in September, making up a surprisingly large portion of the jobs gained in the month. That many not be sustainable. Higher health care spending can be a long-term drag on the economy even as it produces jobs now. The manufacturing sector, which had been one of the drivers of the recovery early on, saw a shrink in employment in September.
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Still, there was some good news. Companies hired nearly 20,000 temporary employees in September. That was about the same number in August. But it is much more than a few months ago, when companies had actually been decreasing their use of temporary workers. That was a really bad sign. Temporary employment is typically a signal of future job growth, as many of those jobs often turn into full time positions. So the fact that companies are consistently adding temps again is a big positive. What’s more, the number of discouraged workers dropped by nearly 200,000 from a year ago, which means more people are out looking for work and optimistic that they will find jobs.
In fact, for those of us who had a job, last month was a pretty good month. Both the number of hours worked and hourly wages went up. The average worker now gets paid $793 a week, up from $776 a year ago. That means we collectively earn about nearly $2.4 billion more a week than we did a year ago. Not a bad raise.
But for those who don’t have a job things are getting worse. The number of people who have been unemployed for more than 6 months rose by over 200,000 to 6.2 million. And the U-6, which is a broader measure of both the unemployed and discouraged workers, rose to its highest level in over a year to 16.5%. Perhaps the most disturbing thing about the jobs report is that it is clear we are no longer in an economy where a rising tide lifts all boats. There is a growing economic divide and it’s not just between the 1% and 99%, but between those who have a job and those who don’t. And the longer the economy muddles along at its current slow pace, the deeper and more damaging that divide will become to the economy and society in general, and the harder it will be to repair.