What September's Employment Numbers Really Say | Diving In

Justin Wolfers (0:00)

On average, we're creating about 50,000 jobs per month. To turn that into English is somewhere between OK, middling, and, you know, a B. And a B in a period where we give a lot of kids A's.

The last jobs report before the midterm elections just came out. So do the employment numbers for September give us any clue about what's gonna happen in, say, November? I'm Justin Wolfers, I'm a professor of economics, and I'm here to help you make sense of this jobs report, this economy, and what it all means for you. This is Platypus Economics. Let's get number crunching.

The headline? Well, the economy created 29,000 jobs last month, but what's a number without context? So let's think about three different ways we might try to make sense of this. So what does a number like 29,000 mean? It means the economy's creating jobs, but barely any. Remember, there's 340 million Americans.

Second way to think about it is, how should we change our views? The story we've been telling ourselves about the economy. Well, as of last night, economic forecasts had expected this number to be close at 80 or 90,000. It came in at 29,000. So this is by any measure a disappointing jobs report. Okay. The thing one should always do when we get new data, new numbers, a new reading, new insight is take a look at the narrative, the story we've been telling and think about, how should we adjust that story?

Well, that's the third way in here, and there was some other bad news that arrived with this jobs report. See, we don't just learn what happened in September. We also will now know a little bit more about what happened in August and what happened in July. You see, the way they put these numbers together, they send out surveys to a bunch of firms. But some of those firms don't get around to sending the surveys back straight away, so we have to revise the numbers. It turns out that when you get a more complete set of surveys, that August job report, which had been pretty good, just got revised down. There were 29,000 fewer jobs created than first estimated. July's report also got revised down by 31,000. And in fact, it now looks like the number of jobs that we got in July actually shrank relative to the prior month. Okay, so a disappointing day today, and the last two months were actually worse than we thought. So now is the time to revise and say the economy isn't running that hot. One of the stories we talked about last month, in fact, was that the economy had just put together six months of positive jobs growth in a row for the first time in a long time. I was kind of excited by that, because that's what's meant to happen. We now know that we actually lost jobs a couple of months ago, so that six-month span actually didn't happen. Look, the way I like to think about it is any given number for any given month, it's a noisy estimate. It could be a bit too high, it could be a bit too low. So you're usually better off looking at what's happened over a run of months. And importantly, if you look over those past three months, if you look past the lows of July, the highs of August and the moderate disappointment then of September, you'd say that on average we're creating about 50,000 jobs per month. That, to turn that into English, is somewhere between okay middling and a B, and a B in a period where we give a lot of kids A's. Okay, that was job growth. The other big thing we learned today is about unemployment. This comes from a separate survey. The unemployment rate rose a tick to 4.2 percent. I'm not going to overemphasize the fact that rose by a tick from 4.1 to 4.2. Roughly speaking, the unemployment rate has been pretty stable for the past couple of years. That's pretty interesting. It's actually unusual that unemployment stays stable. And it's actually also a bit of good news. I want you to recognize that an unemployment rate of four or four and a quarter percent is quite low. It's low compared to America's history. Most of the time I've spent as an economist, we would have been really happy if we give unemployment down to four percent. And it's low compared to other countries. So this really is a domain in which the US is going well. Okay. Now, you might have noticed I've told you a good news story. Unemployment is low and stable. And a not so good news story that we're not creating many jobs. And how can both of those be true at the same time? Hey, I'm glad you asked. It's actually, I don't want to say puzzles, because I think we know the answer, but it's one of the most important ways that this economy is changing. Let me go back. I want to introduce you to a concept. You may have heard of it before called break even jobs growth. Here's the thing. Our economy is always growing. The number of Americans we have is usually growing. People are always leaving school and entering the labor force, and sometimes there's more of that than people who are retiring. What that means is the economy is a bit like a treadmill. We've got to run a bit just to keep in place. That idea how fast do we have to run, that is how many jobs do we have to create, in order to stay in place, that is keep the unemployment rate stable. That pace we call break even jobs growth. Basically, how many jobs do we have to create so that unemployment neither rises nor falls?