Plagued by China’s economic weakening and uncertainty in Europe, the U.S. economy only added 142,000 jobs in September, far short of predictions. Adding insult to injury, the Labor Department revised July and August jobs numbers downward. The unemployment rate, however, remained at 5.1 percent, the lowest point during Barack Obama’s presidency.
Analysts typically state that any jobs report at or above 200,000 jobs created in the month means the economy is healthy. Economist earlier predicted the number would be just above that number at 204,000, just over 60,000 short of what the report indicated.
“It’s a very disappointing report across the board,” says Sung Sohn, an economics professor at California State University, Channel Islands. “The U.S economy is really buckling under the pressure of a global economic slowdown.”
July’s jobs report was revised down by 22,000 and August’s numbers were revised to 136,000 from the 173,000 initially reported, clear indications that the slow-moving global economy is starting to have a negative influence in the American economy.
Late this summer, China’s economy started taking public measures to counter its slowing economy, the first such sign from the communist nation that there was a problem in what has consistently been fast-paced economic growth. Europe, for its part, has also been dealing with a stagnant economy as it is still dealing with the drag on the European Union by Greece’s financial crisis. At home, lower oil prices have also impacted jobs numbers, with some larger energy corporations announcing massive layoffs over the past year.
These factors have played a part in the hiring freeze at some large U.S. companies. Chicago-based Caterpillar pointed to global economic conditions when it announced the corporation would cut 10,000 jobs in the near future. Chesapeake Energy, an Oklahoma City oil company, announced earlier this week a 15 percent reduction of its workforce. Earlier this year, Devon Energy, also in Oklahoma City, reduced its workforce based on the massive devaluation of oil prices.
Job cuts are not the only form of reaction to economic conditions. Some companies will be hesitant to hire new workers until economic conditions improve.
“When there’s uncertainty people just wait and see,” said Joe Huddle, executive vice president at DHR International. Huddle did caution that September could be just a small bump in the economic road and that a trend has not necessarily started.
Despite the warning to avoid reading too much into one report, other signs are starting to emerge that the American economic is heading towards a shift, even if it isn’t another slowdown. The labor force participation rate – the report determining the percentage of Americans capable of working that either employed or seeking work – has dropped to 62.4 percent, the lowest level since October 1977.
Wage growth also is sluggish, falling 1.3 percent below the benchmark set by the Federal Reserve, at 2.2 percent for September. Slow wage growth and a low labor participation rate means many Americans likely do not see much optimism in the U.S. economy.
These reports, along with the economic growth reports from the first half of the year, has shown that 2015 will be a disappointment after the strong 2014 year. Last year’s jobs average was 238,000 between January and September, a sharp contrast of the 198,000 average for the same time this year.
These factors will play a large part in determining if the Federal Reserve will actually raise rates for the first time since Obama took office in 2009. Rate hikes are signs of strong economies, something that has been missing from the Obama Administration.
This month’s jobs report throws questions onto whether Obama will see the Fed raise rates while in office. If he doesn’t, he’ll be the first modern president to not see interest rates increase in his term.