Soft. Tepid. Blech. Meh.
Choose your non-inspiring adjective, possibly in Yiddish, and it nicely describes the long-awaited September jobs report. It wasn't terrible by any stretch -- the nation added 148,000 jobs, and the unemployment rate edged down a tenth of a percent to 7.2 percent. But it is far short of the kind of robust jobs recovery that Americans have been waiting for these last four long years.
If there is any good news to be found, it is that the unemployment rate is now the lowest it has been since November 2008. But, two important observations: November 2008 was hardly the best of times for the U.S. economy. And much of that decline has occurred because of people dropping out of the workforce; the ratio of Americans who have a job is basically unchanged over the last four years.
Indeed, if there is a trend at all, it is in the wrong direction. In the first six months of 2013, the nation averaged 195,000 net new jobs a month. In the last three months, that average has been a mere 143,000. And as a reminder, this is a report covering September, before the government shutdown and debt ceiling showdown that rattled consumer and business confidence. While we won't necessarily see direct evidence of that disruption in the October numbers (due out Nov. 8), what is clear is that the weak September numbers can't be chalked up to one-time disruptions coming from Washington.
So what should we make of yet another month of weak job growth?
First, in hindsight, the Federal Reserve's decision not to begin slowing the pace of its bond purchases in September (the famous "no-taper" decision) is looking better and better. The Fed has said it will keep up its quantitative easing policies "until the outlook for the labor market has improved substantially." While there was a case earlier in the year that that day was arriving, the last few months of jobs reports throw cold water on the possibility, and the uncertainty engendered by the shutdown hijinks in October make the odds of a late-year acceleration in job growth seem remote.
There will be a lot of economic data between now and Dec. 17-18, when Fed officials hold their last policy meeting of the year, but they will likely need to see better data than what we got Tuesday to pull the trigger on tapering at that meeting.
The second implication of these weak numbers for policy are this: The sequestration policy of automatic spending cuts that went into effect in March really are having an effect. It hasn't showed up much in the jobs reports in ways that can be easily measured (though federal government employment excluding the Postal Service is down 73,000 jobs over the last year, a 3.4 percent decline).
But the workhorse economic models used in places like the Congressional Budget Office and Federal Reserve and private sector forecasters all show that the spending cuts should ripple through the economy and translate into less economic activity, and the soft job growth of the last few months fits that story to a tee.
Perhaps the best evidence for federal spending cuts as the culprit behind weak growth is this: It's the only culprit left standing when you consider the other possibilities. Financial markets have been on a tear, and business and consumer confidence has been strong this year (at least until the October shutdown). Consumers have made major progress reducing their debt burdens. The housing market has stabilized, and is no longer a drag on the economy. One possible alternate explanation for the sluggishness is a rise in interest rates that has happened since May, when the Fed started signaling that tapering could be near, but generally it takes more than a few months for the impact of higher interest rates to translate into slower job creation.
In other words, there's every reason to think this should have been a good year for the American economy. Yet here we are back in the doldrums, experiencing the same ambling pace of recovery that has been all too common since the technical end of the Great Recession in the summer of 2009. Americans can probably look to Washington to assign blame -- and that's before the tumultuous last few weeks exact whatever toll they will exact on growth.