Employment: Labor Force Participation Highlights Long-Term Concern

Bottom Line: Job gains were slower than expected in September, August as re-hring slowed in the fifth month of the recovery following 22+ million job losses due to shutdowns for the novel coronavirus. 11.4 million jobs have been gained since May. September data were obfuscated by difficult seasonal adjustments in the education sector, where start dates for many school calendars were adjusted to prepare for social-distanced learning. For now, it appears that sharply fewer education jobs were created than in years' past as many school districts re-hired less support staff. The sectors most hit in the pandemic continued to rebound with leisure and hospitality jobs accounting for nearly half of the private service sector gains. The unemployment rate dropped 0.5 points to 7.9%, as the household survey showed a sharp drop in the labor force participation rate. Moreover, that survey showed sharply slower job gains on the month. Finally, average hourly earnings growth was slower in September. Wage growth appears to be returning to a long-term trend much more quickly than other metrics in the labor force. The new trend rate looks to be slightly slower than prior to the pandemic. Overall, this report was consistent with a moderating economic expansion. Labor force participation rates, though, highlight a potential long-term risk for the economy as the pandemic may have created lasting unemployment for many people. Payroll Employment rose by 661k in September, compared with market expectations for an increase of 859k. The prior 2 months were revised, higher in August by 118k and higher in July by 27k. Government jobs FELL by 216k. Private sector jobs ROSE by 877k. Private education jobs fell by 69k. State and Local education jobs fell by -281k. Overall employment is now -6.4% BELOW its year-ago level, Over the past 12 months, 9,648k jobs have been created. In September, the job gains were in:

• Trade, Transportation & Utilities (+95k with 142k of those in Retail Trade),
• Professional & Business Services (+89k with the addition of 8.1k in Temp Help Services),
• Leisure & Hospitality (+318k),
• Education & Health Services (+108k),
• Manufacturing (+66k),
• Financial Activities (+37k),
• Other Services (+36k), and Information (+27k).

Jobs were shed in Government (-216k). The Unemployment Rate FELL by 0.5 percentage points in September to 7.9%, compared with market expectations for a small decline to 8.2%. Household employment rose by 275k while the labor force declined by 695k, resulting in a decrease in the number of unemployed of 970k. The Labor Force Participation Rate FELL by 0.3 percentage points to 61.4%. The Employment-Population Ratio ROSE by 0.1 percentage points to 56.6%. The number of people Working Part-Time for Economic Reasons FELL by 1244k to 6,224k. while Long-Term Unemployment ROSE by 781k to 2,405k (accounting for 19.1% of the unemployed), while the Mean Duration of Unemployment ROSE by 0.5 weeks to 20.7 weeks. There are now 12.6 million people officially unemployed. In addition, there are another 7,227k people who say they want a job but are not currently looking for one. Finally, another 6,224k people are working part-time because of slack economic conditions. The Index of Aggregate Hours ROSE by 1.1%, combining the solid gain in private payroll employment and the longer workweek. Hourly Earnings ROSE by 0.1% in September, below market expectations of 0.2%. Hourly earnings are now 4.7% ABOVE their year-ago level. Weekly Earnings also ROSE by 0.4%, the result of the change in hourly earnings and a longer workweek. Weekly earnings are now 5.6% ABOVE their year-ago level. The Average Workweek ROSE by 0.1 to 34.7 hours, ABOVE the market consensus at 34.6 hours.