Job growth slows to 142k in September showing that America is not immune to global weakness

Non-farm payrolls rose by 142k in September, well below the consensus call for 201k. Private-sector hiring expanded by just 118k, the slowest pace of job creation since March. Revisions were also deeply negative, subtracting 59k from payrolls over the previous two months. August's tally fell to 136k (from 173k), while July's came down to 223k (from 245k)

By industry, goods-producing employment fell 13k, as manufacturing employment fell for a second straight month (-9k) and mining employment fell for the ninth straight month (-10k). This was partially offset by a 8k gain in construction jobs. Private-services employment rose 131k, a hair above the August tally of 122k, but still well below the 210k that it has averaged the year prior. Perhaps the only sector where the news was upbeat was government, which added 24k jobs, all at the state and local level.

The unemployment rate remained steady at 5.1%, but for all the wrong reasons. Household survey employment fell 236k, while the labor force growth fell an even greater 350k. The labor force participation rate fell to a new post-recession low of 62.4% (down 0.2 percentage points) - the lowest level since October 1977.

There was no solace to be found the wage or hours data either. Average hourly earnings were flat, while a 0.3% decline in average hours led weekly earnings down 0.3%. On a year-over-year basis, average hourly earnings remained steady at 2.2%, while the weekly measure fell to 2.2% (from 2.5% previously).

"This is beginning to look like a trend. The combination of negative revisions and underperformance on the headline is evidence that the weakness in the global economy is washing onto American shores. This is more than enough to keep the Fed on the sidelines in October and raises the odds that they will remain there in December", says TD Economics.

While externally exposed goods-producing industries have borne the brunt of the global slowdown, service sectors have not been immune either. Transportation and warehousing has seen two months of deceleration, and even professional business services - previously the growth leader have toned down hiring. Perhaps most poignantly, the private and manufacturing diffusion indices which measure the share of industries adding jobs - have both fallen to new five-year lows. This does not appear to be a one month blip, and has been developing for about six months now.

"The one point we would like to emphasize is that given population aging, we have to begin to adjust down our expectations for job growth at this point in the economic cycle. With stable age-specific labor force participation rates, trend labor force growth will slow to about 80k per month. This is all that is required to maintain a stable unemployment rate. We're getting to the point where demographic pressures are beginning to impinge on job growth. Near-term weakness may stall rate hikes for a few meetings, but it will not delay them indefinitely", added TD Economics.