September Employment Report

September non-farm payrolls grew by 96,000, below the consensus forecast of 145,000. Kerry partisans are cheering as it gives them extra fodder to accuse President Bush of mismanaging the economy. Expect the "outsourcing jobs" and "first president to have employment fall since Hoover" accusations to fly at tonight's debate. This will certainly cheer the Democrats as it's the last payrolls report before the election.

Notes:
1. At the national level, the severe weather appears to have held down employment growth, but not enough to change materially the Bureau's assessment of the employment situation in September - BLS. This is striking many analysts as odd. The economists at my institution write: "[T]hat assessment seems at odds with a rise in jobless insurance claims in Florida after the storms and a 171k increase in the number of people saying they were not at work because of bad weather in the household survey. The BLS's definition of "material" may be substantially bigger than the Street's definition. We suspect the report exaggerates the weakening in the job market significantly...[we] suggest an ex-hurricanes rise in payrolls of about 180k".

Additionally they note that in September 1999 Hurricane Floyd caused 122k people to say they were not at work (vs. 171k amongst the four 'canes this year) Yet at that time the BLS estimated that Hurricane Floyd depressed payrolls by more than 50k. (Sep 99 payrolls were reported initially -8k and eventually revised +187k)

2. The BLS also announced that "The tabulations indicate that the estimate of total nonfarm payroll employment will require an upward revision of approximately 236,000, or two-tenths of one percent, for the March 2004 reference month." That means payrolls from April 2003 to March 2004 were undercounted by 236,000.

3. With regard to relatively sluggish job growth in this recovery, the primary reason as I've said before is productivity. From BLS stats:

year productivity growth (%)
1994 1.2
1995 0.5
1996 2.7
1997 1.6
1998 2.7
1999 2.8
2000 2.8
2001 2.5
2002 4.4
2003 4.4

Once the recovery got underway in 02-03, productivity gains have been 4.4% vs. 2.0% from 94-00. On an annualized basis an extra percent in productivity is associated with 1 million jobs that do NOT have to be created as a result. So if average productivity stayed at 2.0% in 02-03 that would mean approximately 5 million additional jobs.

4. "Only President to lose jobs on his watch since Hoover." True. But note, in addition to 3) above there is an important demographics issue. Using BLS data, the civilian labor force grew 1.4% annually 94-00. For 2001-04 (last 3 months projected) the labor force only grew 0.7%. Checking the population growth for the last 50 years, population growth 1960-1990 is significantly higher than what it is today. (use table 2) In light of much higher productivity, a recession exacerbated by 9/11 and demographics changes this 'fact' is not nearly as relevant as the Democrats want you to believe to be.