Settling for Relative Employment Gains

by: James Picerno

It's all about employment now. More of it would be better, although we may have to settle for losing it at a slower pace for a bit longer.

The U.S. Labor Department will dispatch the official update for September nonfarm payrolls on Friday. Meantime, dismal scientists, pundits and fans of macabre labor stats are making estimates and crunching the numbers on hand.

Wanted Technologies, an employment analytics firm, expects that nonfarm payrolls will fade by 167,000 in September. If so, that would be an improvement over August's loss of 216,000 jobs, albeit a relative improvement.

Absolute improvement, unfortunately, doesn't look imminent. The ADP employment report, released Wednesday morning, advises that the employment rolls shed 254,000 in September. That's better than the 277,000 lost in August, as per ADP, but we're still stuck in the land of relative progress and the odds of returning to Kansas quickly still look slim.

Julia Coronado, senior U.S. economist at BNP Paribas in New York, states the obvious when she tells Bloomberg News that “the state of the labor market is still very weak” and job destruction is “weighing on wages and income,” and remains a "headwind to growth.”

Joel Prakken, chairman of Macroeconomic Advisers, says bluntly that the crowd should be prepared for more losses for the foreseeable future. Although the rate of loss has been diminishing, "employment, which usually trails overall economic activity, is likely to decline for at least several more months, with losses continuing to diminish."

If September's payrolls give ground once more, as seems likely, that'll mark the 21st consecutive month of job destruction for the U.S.—a record string of retreats since the Great Depression. The pain will end soon, but not yet. Then comes cleaning up the mess.

As we've been discussing for some time, the real challenge still awaits. Ending the job loss is critical, of course, but pulling the labor market out of its hole by way of net employment growth on a national basis is a much bigger hurdle. Alas, as Friday's numbers are likely to show, that all-important task is still premature in terms of topical issues du jour.