US Unemployment Dips to 4.2%, Lowest Since March

The latest US jobs report for the month of September has covered different aspects, as if a deceleration of the labor market is observable, with hardly any harbingers indicating a backtracking recessionary condition. However, the non-farm job increase made by 142,000 was not mostly in line with one’s expectations, while June and July readings which were grim, after revisions of August numbers have gone down again by 86 thousand, which emphasizes the existing problems in the job market.

The current rate of unemployment on the contrary reduced, dropping to a figure of 4.2%; the lowest it has been since March. This cut was also complemented by a meager increase in the salary by 0.4% which seems to increase the level of real wages requiring more expenditure by consumers. Such trends however have been concerning that more positive rates of unemployment have been sustained over the recent months which may limits macroeconomic interventions in the near future.

Job Market Resilience

A positive note concerning the latest development on recurrent unemployment incidences is that, the majority of recent cases can be referred to stalling activities as opposed to mass job cuts. This suggests that the economy is indeed decelerating but is not quite in a depression. This is noted by the FOMC who already started to discuss rate cuts as a reaction. Waller pointed out that future changes to the rate should depend on the next data on the economy, with a cut of 25 basis points expected in September and perhaps a few more mini cuts.

Forget excluding healthcare, employment growth in the private sectors ha sthe most sluggish say 39000 additional jobs created in the month of the report. This is an important decline when compared to March figures of 123000 which shows the nature of slowdown per industry Per oli et al. (2020) “While job cuts are not the cause of joblessness, the report starts with a warning, which is the observation of an increase of 0.7 percentage points in unemployment since the beginning of the year, a historically known sign of an approaching recession.” Still, the data speaks otherwise – weakness manifests in hiring not in cuts. There is also steady stability in the level of permanent job loss and the level of new claims for unemployment which is at a very low level. Youth unemployment has deteriorated for people aged 16-24 rising to 9.7 while the situation has improved for those aged above 25. Also, more people are coming back out of unemployment with 40000 who have just lost their jobs. Eugenio Aleman, chief economist at Raymond James Financial says, “The trend on the labour market is encouraging as it is in the stage of derising. It cannot be said that there are storms, the labour market is stable. But no storms are being experienced.” Supporting the same view, Fed policymaker Christopher Waller believes that the fed may proceed to a quarter point cut sooner, however, if needed then there could be more aggressive cuts going ahead as well.

At the same time, Daniel Zhao of Glassdoor and Becky Frankiewicz of ManpowerGroup, while noting the slowdown in the job market, emphasize also how businesses are taking a wait-and-see attitude before the presidential election, something that strongly fits the narrative of the economy improving even under risky conditions.