economy Markets

Jobs Report Misses As Government Payrolls Decline. Revisions, Falling Unemployment Rate Soften Blow

The US economy added 661,000 jobs in September, far less than the 875,000 the market expected, confirming that while the labor market continues to heal, momentum is slowing.

This is the last jobs report before the election and comes on a day when the public is grappling with news that Donald Trump and the first lady contracted COVID-19.

A better-than-expected ADP report Wednesday presaged what looks like a mixed NFP. Revisions added 145,000 to August and July. Those figures are now 1.489 million and 1.761 million, respectively.

It’s important to note (out of respect for the millions of Americans who are still struggling in economic limbo) that there has been no “V-shaped” recovery in the jobs market — not yet, anyway. The figure (above) drives home the point. The US has a long road ahead.

Specifically, the labor market has now recovered a little more than half of the jobs lost in March and April.

The unemployment rate (which defied expectations for a surge to Great Depression-like levels over the summer) dropped to 7.9% in September from 8.4% in August. That’s better than the 8.2% the market was looking for.

Counting misclassified workers, the unemployment rate would have been around 0.4 percentage points higher.

Manufacturing payrolls rose 66,000 for the month, nearly double the 35,000 the market expected and near the top end of the range. Private payrolls jumped 877,000, in-line with consensus (it’s actually a slight beat).

Government employment is where the weakness shows up. 216,000 positions were shed in September. “Employment in local government education and state government education fell by 231,000 and 49,000, respectively”, the BLS says, adding that “a decrease of 34,000 in federal government was driven by a decline in the number of temporary Census 2020 workers”.

Bloomberg notes that the 280,500 seasonally-adjusted drop in employment in state and local education was attributable to “budget cuts along with a switch to virtual education in many districts”. The figure, Olivia Rockeman and Reade Pickert go on to say, “actually rose on an unadjusted basis, though by much less than typical for the start of the school year”.

Additionally, employment in private education dropped 69,000 in September, offsetting August’s gain.

“In September, 19.4 million persons reported that they had been unable to work because their employer closed or lost business due to the pandemic”, the government said. That’s down from 24.2 million in August. “Among those who reported in September that they were unable to work because of pandemic-related closures or lost business, 10.3% received at least some pay from their employer for the hours not worked”, the report reads.

Average hourly earnings rose 0.1% MoM and 4.7% YoY. Those are both below expectations, but the figures remain difficult to parse due to pandemic distortions.

Some have suggested the ongoing recovery in the labor market could undermine efforts to strike a bipartisan stimulus agreement prior to the election. On Thursday evening, Democrats passed a slimmed down $2.2 trillion relief package in the House. Although Nancy Pelosi was keen to emphasize that the move doesn’t mean the door is shut to negotiations with Steve Mnuchin, the vote was confirmation that the sides remained too far apart to make a deal after days of intense negotiations.

For his part, Mitch McConnell is reluctant to countenance anything with a price tag higher than the ~$650 billion “targeted” package the Senate considered last month. With Trump constrained in his capacity to publicly pressure Senate Republicans in the event a hypothetical deal between The White House and Democrats were to materialize, the odds of additional relief for Americans coming prior to the election appear slim, although it goes without saying that the situation is the very definition of “fluid”.

A bevy of Fed officials continue to emphasize in public remarks that additional fiscal stimulus is not only desirable, but wholly necessary. Jerome Powell has made that clear in testimony to lawmakers. Jim Bullard this week broke will his colleagues, suggesting another fiscal package can wait.

“It probably not so much hinges on whether Congress acts before the election or after the election”, Bullard remarked, during a virtual Q&A for a community banking conference. “You could probably wait until next year and then you could assess the situation at that point and make a decision”.

Jobless claims remain elevated above the pre-pandemic record set in 1982.


 

3 comments on “Jobs Report Misses As Government Payrolls Decline. Revisions, Falling Unemployment Rate Soften Blow

  1. runamok says:

    The “All employees, total non-farm” and “Percent of jobs regained” series looks like parabolas. With a first derivate like these series, it’s not looking like Santa is going to have the cash to stuff everyone’s stocking this retail season. This is an economic catastrophe.

    These unemployment figures…. The calculation and political use of these numbers is another example of our system being rigid, ossified, unable to adapt and change. When someone gives up looking for work, we stop counting them, and the unemployment rate goes down. Win!

    Congress believes the system’s propaganda on this. “Look, things are getting better, we don’t need the stimulus now because unemployment is dropping.” Laughably out of touch, almost all of them enviably rich, and doing nothing.

    The labor force participation rate should get more attention than it does.

    • Anaximander says:

      Totally. Almost every statistic is somehow problematic. For example, there’s no “inflation” as per CPI but what if the basket of what you actually want to buy includes “assets for retirement with appreciation potential that is sure to exceed inflation”. Good luck with that, Mr. Joe Public.

  2. Free Capital says:

    Agree with the above comments. Additionally, Department of Labor figures on how many people are receiving unemployment benefits of some kind are in another universe compared to BLS NFP stats. I’ve not looked at September yet, but in August, they showed 18.4% of the workforce to be receiving unemployment benefits while BLS claimed 8.4% unemployment.

    They cannot both be right.

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