Disappointing Job Growth

The creation of net new jobs in October was disappointingly slow. We were able to downplay September’s bad job report because they contained the large but temporary (we hope) negative effects of Katrina and Rita… but it’s a bit harder to brush off October’s weak job creation numbers.

In fact, when one considers the fact that in recent months the construction industry has single-handedly been responsible for a large share of the net new job creation, it looks like this is the third consecutive month of weakness in the non-construction job market. The following chart illustrates.

The period shown in the graph corresponds to what may well be the strongest economic growth of this business cycle. As a bit of context, note that during the six years of economic boom between 1995-2000, the average net job creation in the private sector was about 208,000 per month, with 10% of that job growth coming from construction. So far in 2005 the corresponding numbers are 144,000 and 16%.

Of course, it is possible that the numbers for the past three months were all negatively affected by various hurricanes, and so this may not be the start of a trend at all. But at some point one has to wonder… particularly since these signs of job market weakness correspond uncomfortably well with some tentative signs that the growth in the personal income and compensation slowed during the same period.