October 08, 2021
The index of aggregate hours rose 0.9 in September, the largest rise since March.
The number of jobs added in September came in far below most forecasts, with the establishment survey showing just 194,000 new jobs. However, the household survey showed the unemployment rate falling by 0.4 percentage points to 4.8 percent. This decline was not due to people dropping out of the labor market, as the survey showed a rise in employment of 526,000, and the employment-to-population ratio rose 0.2 percentage points to 58.7 percent.
The Establishment Survey is Not as Bad as it First Appears
It is not clear that the weak story in the establishment survey should be seen as primarily a demand issue. First, private sector employment rose by a respectable 317,000, which follows a sharp upward revision to the August number to 332,000. The biggest surprise in this report is a drop of 123,000 in state and local government employment, putting the September level 874,000 below the pre-pandemic level. This drop, following weak growth in August, is hard to understand since most schools are open and state and local governments are mostly in decent fiscal shape.
Hours Rise Rapidly
The other reason the establishment data is better than it first appears is that there was a substantial increase in the length of the average workweek from 34.6 hours to 34.8 hours. As a result, the index of aggregate hours rose 0.9 in September, the largest rise since an increase of 1.5 in March. This is consistent with the idea that, facing a labor shortage, employers are increasing hours for the workers they have.
Wage Growth Remains Strong
The rapid wage growth we are seeing, especially for low-paid workers, is consistent with this picture. The average hourly wage for production and nonsupervisory workers increased at a 6.7 percent annual rate comparing the last three months (July August, September) with the prior three months (April, May, June). In the leisure and hospitality sector, the annual rate of wage growth over this period has been 18.1 percent.
Low-Paying Industries Shedding Jobs
Consistent with the idea that weak job growth is largely a supply-side story, many of the lowest-paying industries are losing jobs. Nursing home employment fell by 15,800. It is now down 241,000 (15.2 percent) from its pre-pandemic level. Temporary employment dropped 5,200, putting it 257,000 (8.7 percent) from its pre-pandemic level. Employment in child care was up 17,800 in September, but still down 109,000 (10.4 percent) from its pre-pandemic level. Restaurants added 29,000 jobs, but with a drop in August, this put employment just 4,300 above the July level. September employment is 931,000 (7.6 percent) below the pre-pandemic level.
Manufacturing and Construction Have Strong Growth
The manufacturing sector added 26,000 jobs, following a gain of 31,000 in August. Construction added 22,000 jobs after a flat August. The retail sector was a big gainer, adding 56,100 jobs, in spite of a loss of 12,300 jobs in grocery stores, the third-straight monthly decline. The big gainer was clothing stores, which added 27,300 jobs.
Ending Unemployment Insurance (UI) Supplements Had Little Obvious Effect
There was no evidence in this report that ending the $300 weekly UI supplements, and the pandemic unemployment programs, had a notable impact on job growth. Many states had ended their programs in June or July, but the national program ended in early September. It is hard to find evidence in this report of any upsurge in people seeking jobs.
Picture in the Household Survey Is Overwhelmingly Positive
The drop in the unemployment rate was considerably larger than most analysts had expected. The unemployment rate didn’t fall to 4.8 percent following the Great Recession until January of 2016. There is now a large gap in unemployment rates for men and women over age 20, as the unemployment rate for women fell by 0.6 percentage points to 4.2 percent, 0.5 percentage points below the unemployment rate for men.
The share of long-term unemployed (more than 26 weeks) dropped 2.9 percentage points to 34.5 percent. This is still unusually high but far below pandemic peaks hit earlier this year.
The Number of Unincorporated Self-Employed Fell but is Still Well Above the 2019 Average
The number of people reported as being unincorporated self-employed fell by 123,000 in September, but it is still 619,000 above the 2019 level.
Black Unemployment Fell 0.9 Percentage Points
The unemployment rate for Black workers fell to 7.9 percent. The rate for Black men over age 20 was 8.0 percent, and 7.3 percent for Black women. The unemployment rate for Black workers did not get this low following the Great Recession until January of 2017.
Overall Report is Mixed
It is likely that this report will be seen as negative because of the lower-than-expected job growth in the establishment survey. That take is wrong. If we pull out the government sector, (which is hard to understand) job growth in the private sector increased by 317,000 after a rise of 332,000 in August. Also, the rise in hours and the rapid increases in wages, indicates that employers are having a hard time finding workers. If we only had looked at the household side of this report, we would be seeing it as a very strong jobs report for September.
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