The US economy added just 194,000 jobs in September, the government said Friday.
It was the final nonfarm payrolls report the Fed will see prior to the November FOMC meeting, at which most market participants expect policymakers to unveil a schedule for trimming monthly bond-buying.
September’s headline print was another big disappointment (figure below). Consensus expected 500,000.
Revisions added 131,000 to August’s similarly disappointing read, but that likely won’t be enough to offset the letdown associated with September’s miss.
Recall that daily COVID cases in the US peaked during the first week of September. For the purposes of the jobs report, that may have been too late to remove the Delta variable from some would-be workers’ calculus. Jobless claims also rose for three consecutive weeks prior to snapping the streak in the latest report.
Employment in leisure and hospitality rose by just 74,000 last month (figure below).
A slight upward revision to the prior month’s flat reading was immaterial to the overarching narrative. Hopes of a quick rebound for the services sector after August’s somewhat disconcerting deceleration are accordingly dashed.
Employment in leisure and hospitality remains down by nearly 10% from pre-pandemic levels (figure below).
In food services and drinking places, employment was little changed after falling in August for the first time since the winter COVID wave. From January through July, restaurants and bars added an average 197,000 positions per month.
“Further upward pressure on rates is less contingent on the actual payrolls print and more a function of whether it reaches the relatively low bar to keep a November taper announcement on track,” BMO’s Ian Lyngen and Ben Jeffery wrote on Friday morning, prior to the release. “The consensus in this regard was >200,000 and while we could see the Fed tapering as long as the figure is positive, we’re certainly cognizant that 0-200,000 would complicate the FOMC’s decision,” they added.
Consider the reaction function “complicated,” I suppose.
Private payrolls rose 317,000, below the 450,000 consensus. The range of estimates was impossibly wide. A plunge in local government employment (-144,000) was a severe drag. State governments shed 17,000 education jobs and 19,000 more were lost in private education. “Most back-to-school hiring typically occurs in September [but] hiring this September was lower than usual, resulting in a decline after seasonal adjustment,” the government noted, cautioning that “recent employment changes are challenging to interpret, as pandemic-related staffing fluctuations in public and private education have distorted the normal seasonal hiring and layoff patterns.”
You could apply that disclaimer to the entire report if you wanted to. That is, it could come stamped with a red disclaimer that reads: “Recent employment changes are challenging to interpret.”
The unemployment rate fell to 4.8%, below estimates, but the participation rate ticked lower, to 61.6%.
Average hourly earnings rose 0.6% MoM. Consensus was looking for a 0.4% gain. When considered in conjunction with the downside miss on the headline payrolls print, the report had a stagflationary feel — interpretation “difficulties” notwithstanding.
On Thursday, BofA’s Michael Hartnett noted that 10 of the past 12 payroll prints sparked a risk-on move (table below, from BofA).
“Big surprises have caused big rotation trades,” Hartnett added, on the way to sketching what a “risk-on” and “risk-off” report might look like.
A “risk-off” report would, according to BofA anyway, be >600,000 on the headline and average hourly earnings above 0.4% MoM. That would spell a “fast taper plus 2022 rate hikes.”
By contrast, a “risk-on” report would be a Goldilocks headline print between 250,000 and 500,000 and a participation rate above 62%. That, Hartnett said, would presage a “slow taper and no 2022 hikes.”
The actual report conformed to neither of those templates. One more time: “Recent employment changes are challenging to interpret.”
It’s ironic to me that the Fed is trying to accommodate in a bubble here and that acting alone is having little impact on the jobs reports. Continuing accommodation is never going to compensate for a pandemic that is killing people off and creating resistance to employment, especially in the services sector. If say government leaders were interested in protecting their electorate and actually promoting the safe and effective vaccines to their state populations, we might actually have a 90% vaccination rate. With a vaccination rate in that percentile, employment would rebound and the Fed could try to reduce the accommodation IV drip we seem to be perpetually addicted to. Instead, you have a whole party that has decided to politicize misinformation to attack their counterparts despite the science thoroughly proving them wrong at the expense of their voter population’s lives. This is the dumbest time in our history since we were burning women because they were too independent.
I live in a county with a 95% vaccination rate for those currently eligible for the vaccine. In spite of that, there are Help Wanted signs everywhere and the branch of my bank had to close because they can not hire enough tellers. Affordable housing is a contributing factor, however, it was also a contributing factor pre-covid.
One of the reasons for people not yet going back to work is that those who are sitting on the sidelines have their reoccurring basic living costs covered or moved out of the county. For those still living in the county, they had part time jobs to make some extra money for discretionary items/travel- which was ok only when the risk of getting covid was not present.
Hiring expected to pick up in the next few months, based on casual conversations with local businesses.
Hmm…. I can imagine a pool of job candidates for jobs that are open now, and for the flurry of jobs that will be created under Biden’s build back better plan next year. Historically, the United States has benefited by immigrants, hungry for work. To the extent that Americans consider themselves to be well-ensconced and without need to work, there’s a whole bunch of immigrants coming to our country on any given day who would like to have an American job. Sure, the cultures from which they originate may appear not to make them a good fit for many jobs. But like immigrants of the past in this country, the sheer will in some immigrants and their desire to succeed can, if they’re given a chance, overcome personal limitations and shortcomings. It kind of depends on the American desire to realize their value and actually give immigrant voices an ear.
It is well to remember that the virus is distorting all kinds of economic metrics that are more typically reliable. The jobs picture is a very mixed bag at this point. It is clear that monetary policy is not the lever to make improvements in the overall economy right now. It is virus control and mitigation, fiscal policy both federal and state and local, business policies and practices, and individual initiatives that are much more important. The obsession with many market folks on the Fed is misplaced right now in my view.
Fingers crossed that the Fed is clear-eyed and shares your view. I recall they made noise in that direction some weeks ago.