The labor market pulled back from the brink last month. Private-sector job growth rebounded in September for a net gain of 137,000, a dramatically higher pace over August’s meager 42,000 rise, the Labor Department reports. The case for expecting a recession’s near, in other words, has fallen a notch or two. But while September’s job market improved, the growth rate is still weak. The unchanged 9.1% unemployment rate for September makes this point loud and clear.

The economy, it seems, looks poised to grow just enough to keep a new recession at bay. Expecting much more is probably asking too much, but it’s all we’ve got. The trend is hardly spectacular, but it’s hard to make the case that the economy will contract when private sector employment is rising by well over 100,000 a month.

But no one should see today’s number as definitive evidence that the economic recovery will survive. If today’s number had been a substantial move down from August’s thin advance, we’d all be talking about how deep the recession would be. We’re evaluating and reassessing the economy on a daily basis, and that’s not good. It’s a sign that visibility is unusually limited and subject to radical revision depending on the arrival of the next data point.
Another reason to stay cautious is the fact that about one-third of last month’s rise in private sector employment reflected the rehiring of 45,000 striking Verizon employees. That’s helpful, of course, but it was the Verizon strike that contributed to the dismal August report. Relying on the end of worker strikes is hardly the foundation for anticipating better days ahead for the labor market.
“Bottom line, 119k jobs per month have been created in 2011 on average, well below the 150-200k jobs that is needed to firmly lower the unemployment rate and eat into all the jobs lost in this recession,” reminds Miller Tabak’s equity strategist Peter Boockvar. “But certainly for today, the better number eased major concerns about where this economy is headed, at least for now.”
A number of strategists agree. “This is bolstering the case we are not entering a double dip but sort of muddling through,” says Robert Lutts, chief investment officer at Cabot Money Management.
Nonetheless, there’s nothing in today’s report that changes the view that the economy is stuck in a low-growth rut. Even that thin reed requires the assumption that the economy doesn’t suffer another one of those infamous exogenous shocks. On that note, let’s hope Europe gets its act together… soon.
Meanwhile, when you’re flying low, the risk of hitting something is always lurking. Yes, this is about as precarious as it gets for growth. Welcome to the un-recession!