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Job Growth Numbers Uninspiring

October 7, 2016
Read Time: 0 min

Tom_Cunningham.jpgGuest blog by Tom Cunningham, PhD, Economist

As employment is a key factor in projecting loan portfolio performance, current employment statistics and longer term trends are likely to be primary considerations for most banks and credit unions as they incorporate forward-looking economic factors in their ALLL estimations under the CECL accounting standard.

Atlanta – October 7, 2016 . . . In light of greater expectations, the September jobs report could only be considered uninspiring. Non-farm payroll increased 156,000 for the month of September. A rise in the headline unemployment rate (U3) of 0.1 percent to 5 percent, and an unchanged 9.7 percent rate in the broader measure of labor underutilization (U6), which includes part-time workers looking for full-time work and workers on the sidelines, signals that the jobs created in recent months have encouraged some workers back into the labor force. As well, a slight increase in wages, 0.2 percent, indicates some shift in supply and demand with employers willing to pay more to attract employees.

Job gains were greatest among professionals and business services workers. Healthcare, food services and retail also recorded notable gains. The remaining job categories were essentially unchanged. Mining employment was flat, breaking a long chain of monthly declines. 

All in all, September’s employment report is not strong by recent standards. In a larger sense, it’s also not that bad. Current demographics are such that the U.S. needs less than 120,000 jobs added per month on average to keep the unemployment rate constant, so in a longer term sense, this is enough to keep putting downward pressure on U6 and U3. 

One reasonable interpretation of September’s job data is that we’re in a wait-and-see period. No sector showed meaningful job loss and a few showed gains, suggesting, from a big picture perspective, persistent uncertainty amidst a fundamentally positive U.S. economy. No sector shows real weakness – if you were faced with both weakness and uncertainty you would expect net job attrition – and the sectors that are growing are typical of a strong economy. The jobs gains in those areas were solid in September, if not as substantial as some monthly surges we have seen recently. That would indicate most of the hiring was required to meet increased demand, which is also supported by the growth in company earnings in September of 2.6 percent year over year, which also is consistent with recent months.

Tom Cunningham holds a Ph.D. in economics from Columbia University and was senior economist with the Federal Reserve Bank of Atlanta from 1985 to 2015. Mr. Cunningham serves as a consultant to MST in the creation and ongoing development of the MST Virtual Economist.


Under CECL you will be required to consider economic factors in determining future expected loan losses. The MST Virtual Economist is an efficient, automated way to evaluate qualitative economic factors and project their impact on the institution’s loss rate, find new variables that impact the loss rate and determine the relevance of the economic factors you are already using to make qualitative adjustments. Click here for more information or to schedule a demonstration.

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