The latest jobs report makes dismal reading for economists and policy makers alike with a double blow of poor job creation and falling wages.
The number of new jobs created in September amounted to just 142,000 – significantly below the 203,000 the had been forecast. Average wages also took a hit over the month falling by one cent to $25.09.
The unemployment rate now stands at 5.1 percent – the lowest in seven years. While the unemployment rate may be low, this in part due to the lowest labor force participation rate since 1977.
According to Carl Tannenbaum, chief economist at Northern Trust in Chicago, “we had very low levels of job creation, wage growth isn’t budging, and the unemployment rate would have risen if the labor force participation rate hadn’t fallen.”
The shock report took markets by surprise with the Dow Jones dropping 250 points in early trading. Both the Nasdaq and the Standard & Poor’s 500 fell by 1.5 percent.
Brad McMillan, chief investment officer at Commonwealth Financial Network, said “this is not what the markets were looking for, this is not what pretty much anybody expected.” He added the report was “disappointing across the board.”
Worse than expected jobs numbers will most likely put the brakes on the Federal Reserve’s plan to raise interest rates which have been languishing between zero and 0.25 percent since 2008. Most analysts expect the nearest rate rise to come in March 2016.
Economists were quick to respond to the Labor department’s report, warning September’s lackluster numbers could be a sign of worse to come.