The U.S. job market showed mixed results in the latest employment report. Payroll increased slightly but was revised back down, though the jobless rate remained quite low and financial markets responded well. The report confirms the need to take a longer-term view when assessing the state of the labor market, according to Claudia Sahm, Chief Economist.
Payroll Revisions Are Common
Economists said monthly payroll data is subject to frequent revisions as more comprehensive employment data comes out. These changes are not thought to indicate any shortcomings in the reporting system, but are just part of the normal reporting process of the U.S. labor statistics.
One Month Doesn’t Tell the Full Story
Economists warned that they shouldn’t overlook a single jobs report. Rather, they suggest measuring the employment situation in a more comprehensive manner using moving averages and a variety of employment indicators.
Job Growth Has Moderated
The three-month average of payroll growth fell to about 111,000 after the latest revisions, which suggests a lower hiring rate than had been seen in the first half of the year.
Unemployment Remains a Key Indicator.
The unemployment rate offers a better idea of the overall health of the labor market than payroll data does, in part because it shows the number of people seeking jobs, economists said.
Hiring Still Exceeds Labor Force Growth
Economists pointed out that job growth has been muted, but still above expectations for long-term growth of the labor force, indicating further expansion.
Labor Force Participation Declined
Unemployment dropped to 4.2%, but the drop was accompanied by a drop in labour force participation. This trend, which is worth watching, could affect employment statistics, economists said.
The Fed Is Likely to Stay Focused on Inflation
Claudia Sahm, the Fed’s latest employment report is not likely to substantially shift the Fed’s policy outlook, as the focus will continue to be on inflation, Sahm said.
Immigration May Affect Some Industries
Lower immigration could help reduce unemployment in areas that rely on immigrants to fill jobs such as construction. Economists, however, say it is hard to pick out the overall effect in national employment data.
Labor Data May Become Harder to Measure
Economists also pointed out that the decline in survey participation may have an impact on the quality of employment data and make it more difficult to provide accurate employment data.
Markets Reacted Positively
The U.S. stock futures rose, and market volatility abated after the release of the jobs report. The report appeared consistent with a slowing but still relatively stable labor market, as investors did not appear shocked by it.
