September Jobs Report Shows Continued Economic Churn
The final national jobs report before the November elections showed a slowing pace of job creation amid continued economic volatility, the Bureau of Labor Statistics said Friday.
BLS said total nonfarm payroll employment rose by 661,000 in September. In any month pre-coronavirus pandemic, job creation of that magnitude would be significant. However, in the wake of the pandemic, jobs created still pale compared to the nearly seven million jobs that remain lost since February.
The unemployment rate declined by 0.5 percentage point to 7.9 percent, and the number of unemployed persons fell by 1.0 million to 12.6 million. Both measures have declined for 5 consecutive months but are higher than in February, by 4.4 percentage points and 6.8 million, respectively.
BLS revised up total nonfarm payroll employment for July by 27,000, from 1,734,000 to 1,761,000; and revised up August numbers by 118,000, from 1,371,000 to 1,489,000. With these revisions, employment in July and August combined was 145,000 more than previously reported.
“There is a tremendous amount of churn in this job market,” said Mike Fratantoni, Chief Economist with the Mortgage Bankers Association. “The pace of layoffs remains high, and even though many employees are being rehired, net employment gains are slowing.”
Fratantoni noted total employment remains 7 percent below its February level. “One noteworthy development was that private employment increased by a strong 877,000 jobs, while government employment fell by 216,000 – driven by drops in local government education employees, as many schools did not bring their workforces back in September.”
“Job growth is going to be more difficult in the coming months,” Fratantoni added. “Workers on temporary layoff continue to be called back to work, but the number of permanent job losses have increased by 2.5 million since February,” he said. “More businesses are struggling to stay afloat. “The decline in the unemployment rate, while welcome, was certainly impacted by a decrease in the labor force participation rate. That said, it is positive to see the U-6 and other broader measures of underemployment decline as well.”
For the housing market, Fratantoni said record-low mortgage rates and an improving job market should support strong demand for the rest of the year. “However, further slowdowns in hiring could cause some households to delay decisions to buy,” he said.
Odeta Kushi, Deputy Chief Economist with First American Financial Corp., Santa Ana, Calif., said as the pace of job market recovery slows, house-buying power at risk from slowing wage growth.
“More concerning than the headline unemployment rate is the long-term economic scarring from workers dropping out of the labor force altogether,” Kushi said. “A lower labor force participation rate tends to go hand-in-hand with slower wage growth. For the housing market, slower wage growth could chip away at house-buying power, while the ongoing supply shortage continues to put upward pressure on house price appreciation, with repercussions for affordability.”
“The September jobs report offered more evidence that the second half of the economy’s recovery will be much slower than the first,” said Sarah House, Senior Economist with Wells Fargo Securities, Charlotte, N.C. “A wave of high-profile mass layoff announcements in recent days and stubbornly high jobless claims suggest the speed of the recovery is likely to downshift even further in the coming months. Just over half (52%) of the 22.2 million jobs lost are now recovered, and with the virus continuing to circulate and waning fiscal support, the second half of the recovery will likely be notably, and at times, painfully slower. While we estimate GDP will recover to its pre-pandemic level by late 2021, the jobs recovery is unlikely to be complete by the end of 2022.”
The report said average hourly earnings for all employees on private nonfarm payrolls improved by just two cents, to $29.47, in September. Average hourly earnings of private-sector production and nonsupervisory employees were also little changed in September (+1 cent) at $24.79. “The large employment fluctuations over the past several months–especially in industries with lower-paid workers–complicate the analysis of recent trends in average hourly earnings,” BLS said.
The average workweek for all employees on private nonfarm payrolls rose by 0.1 hour to 34.7 hours in September. In manufacturing, the workweek rose by 0.2 hour to 40.2 hours, and overtime decreased by 0.1 hour to 2.9 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls rose by 0.1 hour to 34.1 hours.
