At 8:30 am, the US government released its September Jobs Report.
Seventeen minutes later, Donald J. Trump declared victory:
Trump is right – at 3.5%, the new unemployment rate is the lowest since December 1969 – but that only tells part of the story.
But what else can we learn from September's Jobs Report?
Let's have a look:
September's job growth was below average
- Employment increased by 136,000 in September, but that's far below the average monthly job growth for 2019 (161,000) and 2018 (223,000).
More people left the labor force than got jobs
- 136,000 people were hired, but the number of unemployed persons decreased by 275,000. In other words, 139,000 people stopped looking for work.
Long-term unemployment is a giant problem
- More than 22% (!) of the unemployed pool has been out of work for 27 weeks or more. People who cannot find a job stop looking for one. See the point above.
We're playing without 1/3 of our team
- Labor force participation is only 63% – thirty-seven percent of working-age Americans do not have a job and are not looking for a job. The American economy is only using two-thirds of its human capital. See the above points.
The headlines will declare Trump-like victory, but the economic reality is more complicated. Even if you want to focus on the low unemployment rate, you should keep in mind that, historically, the average unemployment rate is about 5%. If you believe trends revert to their mean, unemployment will go up.
It's just a matter of when – before 2020 or after – that happens.