A New Old Story For Jobs: Slow Growth

Today’s employment report for August from the Labor Department is a disappointment, but not enough to sink the case for expecting slow growth for the economy overall. Nonetheless, after yesterday’s 201,000 increase via ADP, this morning’s weak 103,000 gain for private nonfarm payrolls is a wet rag.

Even so, August’s tepid increase is enough to keep the year-over-year percentage change for payrolls at 1.8%. That’s basically unchanged from July’s annual pace. It’s also a sign that the labor market isn’t caving, even if looking at the latest monthly numbers suggests otherwise.

Then again, given the current climate, arguing that the glass is still half full tends to fall on deaf ears. “This is definitely a setback for the labor market and the economy,” Michael Feroli, chief U.S. economist at JPMorgan Chase, tells Bloomberg. “This clearly validates Bernanke’s concern. We have Europe, the fiscal cliff, and it is a generally cautious business environment.”
Fair enough. But if you’re looking for clear signs that the economy is tanking, today’s jobs report still falls short of a smoking gun. Private employment continues to rise at roughly 1.8% a year, today’s report advises. That’s down a bit from the 2.0% rate in this year’s first quarter, but the annual pace is still in line with the trend over the last several years. That implies that more of the same is on tap for the immediate future, namely: slow growth, perhaps spiked with some upside surprises along the way.
Yes, it’s an old forecast, not to mention an increasingly frustrating one. But it’s been an accurate forecast for some time and there’s little in the August payrolls report to suggest that we’re going to see much in the way of change, for good or ill. That leaves us with pondering what the Fed might do next, and when.
“This weak employment report, in jobs, wages, hours worked and participation is probably the last piece the Fed needs before launching another round of quantitative easing next week,” opines Joseph Trevisani, chief market strategist at Worldwide Markets. “QE will boost equities, damage the dollar and do little for the economy, but what else can an activist Fed do?”