Unemployment at 50 Year Low but Job Growth Disappoints

In a week marred by an impeachment investigation and news of European tariffs, investors can take some positives from the latest job report.

The government announced this morning that unemployment is at a 50-year low, although new jobs in September failed to live up to expectations. Analysts predicted that 150,000 jobs would be created, but the data fell short at 136,000.

While the news isn’t a disaster, it does reaffirm what many economists have been saying for months. The American economy is starting to slow, and we could be at the tail end of growth.

Take the Positives as they Are

The unemployment rate dropped to 3.5% in September, the lowest it has been since 1969. With more people working, there will be more activity in the economy, helping to offset a recession for the near future.

Jobs in the government sector grew by 22,000, making it one of the strongest performers.

The Negatives are Still Worth Noting

The mixed news does come with some downsides. There’s the fact that job creation missed the consensus targets. In addition, worker pay growth over the last 12 months has fallen to 2.9%, compared to 3.2% a year ago. In September, wages remained mostly flat when compared to August.

The retail sector missed out on the growth. Employment dropped by 11,000 in September. Largely impacted by eCommerce and stiff competition, this could cause some investors to reconsider their holdings in retail.

The manufacturing sector also declined, losing 2,000 jobs.

How Significant is Manufacturing Shrinkage?

The White House has promised to bring jobs back from China and other manufacturing competitors. Even with extensive tariffs in place, manufacturing jobs are still shrinking. It’s not all down to foreign competition. An increased level of automation contributes to layoffs.

Investors can look at the manufacturing shrinkage in two ways. In terms of job losses caused by automation, it could mean increased profitability for the largest manufacturers. However, in terms of getting money back into the economy through consumer spending, job losses are bad news.

Consumer spending makes up around two thirds of GDP, a key measure of economic performance. The loss of 2000 jobs in manufacturing is not significant on a national scale, but it’s something to watch in future job reports.

Overall, the news will be received with mixed emotions. The administration has done an impressive job at bringing down unemployment, but wages and raw job numbers should still be targeted to help sustain the economy.