US companies created 661.000 new jobs in September, according to the latest figures from the US Bureau of Statistics. As a result, the pace of job creation has slowed compared to August. What does this mean?
The delayed job creation also applies if we remove government jobs (for the purpose of the population census, for example, which significantly boosted the number of new jobs in April). It is a sign that the economic recovery after the corona recession is experiencing more headwinds than expected. It will take a long time to catch up on the corona damage.
The fact that unemployment has fallen from 8,4% to 7,9% does not alter this conclusion. In reality, unemployment is probably higher than 7,9%. For example, in September 6,3 million Americans said they were working part-time because it was the only option, not because they wanted to. In fact, they are partially unemployed, but are not counted as such. In February, on the eve of the corona crisis, there were 4,3 million people.
Not actively looking, not registered
In addition, there were more than 7 million people – 2,3 million more than in February – who would like to work but were not actively looking for a job. Because they were not actively looking, they were not registered as unemployed, which in fact they are.
All in all, compared to February this year, millions of Americans had a job at the time and now either have no job and estimate the chance of finding it so low that they do not even look or work part-time where they want to be. previously worked full-time. Their income is therefore lower, which results in less spending. Macroeconomics means that the actual consumption, the engine of economic growth, is faltering.
Long time for 4%
The fact that the number of people unemployed for 27 weeks or more was 781.000 higher in September (totalling 2,4 million) is also a worrying sign. Experience shows that the longer someone is unemployed, the more difficult it becomes to get out of unemployment.
Even if the real unemployment rate is 7,9%, it will take a long time for unemployment to fall back to 4%. This is the level at which the Fed starts to think about when to loosen monetary policy. With unemployment actually higher, that moment is even further in the future. Much further. So much further than a less accommodative monetary policy, in my view, is not to be expected this year and next. Rather, the bank's policy is becoming even broader.