The September employment report indicated that the labor market remains strong. However, wage growth appears to have slowed. According to most predictions the report showed a gain in employment of 263,000 jobs. The unemployment rate fell to 3.5 percent, which is the lowest level in half-century.
Despite this strength in wage growth, September saw a mere 0.3 percent increase in wages, the same rate as August. This is a pace that would be consistent with the Fed’s 2.0 percent inflation target.
The rate that grows over a longer time frame is higher. Comparing the wages for the last three months (July-August, September) with those of the previous three months (April-May, June), you can see that the annual wage growth has been 4.8 percent.
This is however a drop from the 6.1% pace at the beginning. Evidently, wage growth is not increasing as Beveridge Curve models predict given the vacancy rates.
Hispanic Unemployment Hits Record Low, Black Unemployment Ties to Recovery Low
The September Black unemployment rate dropped to 5.8 %, reversing recent increases and tying for low point in the recovery. Black teens saw their unemployment rate fall to 12.7 percent in September, which is the second-lowest level ever and lower than any previous pandemic. Hispanics had the lowest unemployment rate ever, at 3.8 percent.
Most of the household survey data were very positive. The unemployment rate for foreign-born workers dropped by 1.0 percentage points to 2.9 percent. The U-6 measure of labor market slack was 6.7 percent, which tied the record lows reached this summer.
Jobs Gains Widespread Across Sectors
While most sectors saw job gains in September across all sectors, the exception was state and local governments. In September, state and local government employment declined by 27,000, partially reversing August’s gains. This is likely due to seasonal adjustment issues related to changes in school opening times. However, state and local government employment remains below 600,000. This is after adding the preliminary benchmark revision.
The flip side of the coin is that private sector growth was faster. In September, the private sector added 288,000 jobs. Employment is now 1.1 Million higher than its pre-pandemic level and more that 1.6 Million higher when you include the benchmark revision.
Construction continues to add jobs, Manufacturing jobs nearly 100,000 above pre-pandemic levels
In September, 19,000 construction jobs were added. Residential construction is still adding jobs despite the decline in housing starts. Due to supply chain problems, there is a huge backlog in unfinished homes. Workers are needed for their completion.
September saw 22,000 new jobs in manufacturing. Now, employment is nearly 100,000 higher than it was before the pandemic. With the benchmark revisions, it would rise to almost 120,000.
September saw the addition of 2,800 jobs by airlines. This is more than 50,000 (almost 10%) more than pre-pandemic levels. Restaurants added 60,000 jobs in September, which was another major job gainer. The industry still has 560,000 fewer jobs than before the pandemic.
Nursing homes added 1,400 jobs while childcare centers lost 2,000. The employment in these two sectors is down by 14.1 and 9.7 percentages, respectively, from pre-pandemic levels.
Mixed picture on labor force participation rate
The labor force participation rate (LFPR), which had risen 0.3 percentage points in August saw a 0.1 percentage point decrease in September. The LFPR edged up by 0.2 percentage points for prime-age (ages 25–54) men to 88.8 percent. This is 0.8 percentage point below the pre-pandemic peak. The LFPR for prime-age women fell 0.6 percentage point to 76.6 percent. This is 0.3 percentage points lower than the pre-pandemic peak. These monthly changes are mostly noise and it is possible that we will see increases through the fall bringing the employment in the household survey closer to the job growth in establishment survey.
Unchanged Length of the Average Workweek
In September, the average workweek remained unchanged at 34.5 hours. This is slightly higher than the 34.4 average for 2019, however, it was still a level that was often seen before the pandemic. This is significant because the average workweek peaked at 35.0 in January 2021 when employers couldn’t hire more workers and therefore worked more. This is yet another sign of a return back to normal in the labor marketplace.
Self-employment remains high
In the pandemic, there was a large increase in self employment. This is continuing even as the labor markets return to normal. In September, the number of self-employed incorporated rose by 38,000 and is now over 500,000 higher than the 2019 average. The 2019 average number of unincorporated self employed is more than 300,000.
Record-breaking Unemployment Rate at Voluntary Quits
The 15.9 percent increase in unemployment was due to people leaving their jobs voluntarily. This is a clear indicator of labor market strength and indicates that people are still optimistic about their future job prospects.
All duration measures of unemployment also declined in the same manner. The average length of employment spells fell by 20.2 weeks, while 8.3 weeks was the median. The percentage of long-term unemployed (more that 26 weeks) fell from 18.5 percent to 18.5 per cent. These numbers are mainly a story about getting back to normal, after experiencing very long spells or unemployment earlier in the recovery.
Positive Report
This report presents a generally positive picture of labor market. The overall unemployment rate has fallen to a half-century ago. Hispanics have seen their lowest unemployment rate in history. The unemployment rate of Black workers is close to its lowest level and that of Black teens is at its second lowest level. It exceeds only the rate for a single months earlier in the pandemic.
For the second month in a row wages grew at a 0.3 percent rate, a pace consistent with the Fed’s 2.0 percent inflation target. While wage growth has been higher than in previous months on average, it is clear that the pace of wage growth is slowing and not accelerating due to tight labor markets.
Although the Fed won’t be ready to declare victory over inflation, this report does show that things are moving in the right direction. Employment is growing at a strong, but not sustainable, pace.
