Employment Gains Ground in September; Consumer Credit Surges
- Oct 08, 2012
On Friday, Economy Watch reported that the unemployment rate was down in September because of discouraged workers quitting their job searches. While that has often been the case for downward movements in the unemployment rate during recent years, that wasn’t true for September 2012. It was an erroneous assumption, and Economy Watch regrets the error.
The drop in the employment rate was from 8.1 percent to 7.8 percent — the lowest it has been in nearly four years. The Bureau of Labor Statistics reported in its household survey that the number of people who count as employed increased by 873,000 in September, the largest such monthly increase in almost 30 years. The household survey, which asks U.S. households about the number of people employed at each household, is a separate survey from the establishment survey, which asks employers about the number of people working at their establishment.
The headline number for monthly employment tends to be the one generated by the establishment survey, which in the case of September was a net positive of 114,000. While the household and the establishment employment numbers can be hard to reconcile, there are a number of factors that can account for much of the difference. For one thing, revisions in the July and August establishment surveys found that the economy added 86,000 more jobs than previously estimated, for a net of positive of 146,000 per month from July to September.
Also, the household survey counts among new employed people who take part-time work “for economic reasons,” that is, those who are working part-time because their hours had been cut back or because they were unable to find a full-time job. In September, the number of such workers surged from 8 million in August to 8.6 million in September, which added significantly to that survey’s total.
Besides the net increase in total jobs reported by the BLS’ household survey, other results pointed to a strengthening labor market. For one thing, the number of long-term unemployed dropped below 5 million for the first time since ’09.
Also, the employment-population ratio, which is the number of people with jobs compared with the total number of people, increased by 0.4 percentage points to 58.7 percent in September, after edging down in the prior two months. That’s better, but of course still low compared with (for example) 2006, when the ratio was a relatively healthy 63 percent. Within the overall employment-population ratio, the ratio for workers aged 25 to 54 was at 76 percent in September, its highest level in about four years. During healthier economic times, that subset of the population sees an employment-population ratio of more than 80 percent.
Consumer Credit Edges Up
Also on Friday, the Federal Reserve reported that total consumer credit grew at an annualized rate of 8 percent during August, with revolving credit expanding at 5.9 percent annualized, and nonrevolving (car, boat and student loans) growing at 9 percent annualized. Outstanding consumer credit is a bit more than $2.7 trillion as of August, which reflects growth in both kinds of credit since the end of 2011, when $2.63 trillion was outstanding.
Total revolving credit was $825.4 billion in September, up from the beginning of 2012, but still not as high as in pre-recessionary years. In 2007, for instance, total revolving credit was a little more than $1 trillion. Nonrevolving credit, on the other hand, has growth from about $1.52 trillion in 2007 to $1.88 trillion as of September 2012, as people buy more cars and take out more student loans.
Wall Street ended the day mixed on Friday, ahead of the Columbus Day holiday weekend, which will mean the markets are closed on Monday. The Dow Jones Industrial Average was up 34.79 points, or 0.26 percent, while the S&P 500 gained a slight 0.03 percent and the Nasdaq was down 0.42 percent.