The labour market report for September showed a disappointing 263,000 loss of jobs compared to market expectations of a 175,000 drop. As well, the report suggested a break from an earlier easing trend in the pace of jobs losses following drops of 201,000 (revised from -216,000) in August, 304,000 (-276,000) in July and 463,000 in June. The report also showed an expected rise in the September unemployment rate to 9.8% from 9.7% in August.
The weakness in employment was relatively broadly based with the goods-producing sectors shedding 116,000 jobs with service-producing industries dropping 147,000. Within the former, construction lost 64,000 jobs, while manufacturing saw a drop of 51,000. Within the service-producing component, all major industries saw declines led by trade, transportation and utilities (60,000) and retail (39,000). The government sector also shed a sizeable 53,000 jobs.
Disappointing news in today’s report was also contained in the workweek measure, which dropped to 33 hours for the overall economy, down from 33.1 hours in August. It was a similar story for manufacturing where the workweek eased to 39.8 hours from 39.9 hours, while overtime dropped to 2.8 hours from 2.9 hours in August. As a result, the index of aggregate weekly hours, which reflects the combined effect of employment and hours worked, was down a disappointing 0.5% in the month. However, it is of note that the annualized decline in this measure in the third quarter of 3% represents an easing from declines of 7.8% and 8.9% in the second and first quarters, respectively.
Weakening labour markets are restraining growth in the average hourly earnings index, the key wage measure in the report. The index rose only 0.1% in the month compared to expectations of a 0.2% rise, which sent the year-over-year rate down to 2.5% in September from 2.6% in August.
The larger-than-expected drop in September payroll employment is clearly disappointing. However, some solace can be taken from the fact that, despite the deterioration in September, the average monthly drop in the third quarter of 256,000 compares to declines of 428,000 and 691,000 in the second and first quarters, respectively.
However, the continued shedding of jobs implies downward pressure on labour income and upward pressure on the unemployment rate. To prevent a negative feedback loop from kicking in and to move the economy towards job growth, policy will need to continue to be stimulative. Recently introduced fiscal measures have been an important factor returning GDP growth to the positive column in the third quarter via the “cash-for-clunkers” rebates. Monetary policy is also expected to make its contribution by continuing to help revive earlier-stalled financial markets both by directly providing liquidity and by keeping interest rates low. This support will likely be needed through next year. In fact, our forecast assumes that the Fed funds rate will not rise from its current very low range of 0% to 0.25% until the final quarter of 2010.
To view charts of today's data, go to
http://www.rbc.com/economics/html_calendars/ca/calendar.html (Canada)
http://www.rbc.com/economics/html_calendars/us/calendar.html (United States)
The weakness in employment was relatively broadly based with the goods-producing sectors shedding 116,000 jobs with service-producing industries dropping 147,000. Within the former, construction lost 64,000 jobs, while manufacturing saw a drop of 51,000. Within the service-producing component, all major industries saw declines led by trade, transportation and utilities (60,000) and retail (39,000). The government sector also shed a sizeable 53,000 jobs.
Disappointing news in today’s report was also contained in the workweek measure, which dropped to 33 hours for the overall economy, down from 33.1 hours in August. It was a similar story for manufacturing where the workweek eased to 39.8 hours from 39.9 hours, while overtime dropped to 2.8 hours from 2.9 hours in August. As a result, the index of aggregate weekly hours, which reflects the combined effect of employment and hours worked, was down a disappointing 0.5% in the month. However, it is of note that the annualized decline in this measure in the third quarter of 3% represents an easing from declines of 7.8% and 8.9% in the second and first quarters, respectively.
Weakening labour markets are restraining growth in the average hourly earnings index, the key wage measure in the report. The index rose only 0.1% in the month compared to expectations of a 0.2% rise, which sent the year-over-year rate down to 2.5% in September from 2.6% in August.
The larger-than-expected drop in September payroll employment is clearly disappointing. However, some solace can be taken from the fact that, despite the deterioration in September, the average monthly drop in the third quarter of 256,000 compares to declines of 428,000 and 691,000 in the second and first quarters, respectively.
However, the continued shedding of jobs implies downward pressure on labour income and upward pressure on the unemployment rate. To prevent a negative feedback loop from kicking in and to move the economy towards job growth, policy will need to continue to be stimulative. Recently introduced fiscal measures have been an important factor returning GDP growth to the positive column in the third quarter via the “cash-for-clunkers” rebates. Monetary policy is also expected to make its contribution by continuing to help revive earlier-stalled financial markets both by directly providing liquidity and by keeping interest rates low. This support will likely be needed through next year. In fact, our forecast assumes that the Fed funds rate will not rise from its current very low range of 0% to 0.25% until the final quarter of 2010.
To view charts of today's data, go to
http://www.rbc.com/economics/html_calendars/ca/calendar.html (Canada)
http://www.rbc.com/economics/html_calendars/us/calendar.html (United States)
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