Why September’s Jobs Report Was a Huge Disappointment

The U.S. economy added just 143,000 new jobs and September, while the unemployment rate held steady at 5.1%, according the most recent estimate from the Bureau of Labor Statistics.

The headline number came in far below the roughly 200,000 new jobs that economists were expecting, while job gains in August and July were revised down by 59,000, adding more gloom to an already lackluster report.

The news should give a boost to those inside the Federal Reserve who argue that the central banks should hold off on raising interest rates until next year. Fed Chair Janet Yellen has said for months now that she believes the economy will be strong enough to raise rates by the end of December. The basis of her theory is that although inflation has remained well below the Fed’s target, healthy job growth of late will eventually cause prices to rise faster.

But with job growth coming in below economists’ estimates, and average hourly earnings remaining flat, Yellen’s theory isn’t getting any support from the September numbers. Meanwhile, the broadest measure of unemployment, the employment-population ratio, fell again to 59.2%, and it remains well below its pre-recession peak. If you take the employment-population ratio of just 24-54 year olds, to account for the fact that more Americans are retiring as the nation ages, the picture looks a bit brighter:

While these numbers don’t show the labor market going backwards, there’s been little progress in removing slack in the labor market by this, and other alternative measures. It’s important to not read to much into any one jobs report, as the margin of error is quite large for any single month. Job growth for all of 2015 is still hovering around 200,000 per month, which is quite strong. But the data should give pause to anyone hoping to claim that the U.S. economy has reached escape velocity.