Article Attachment

The attached file contains this articles commentary as well as tables and charts of the data.
Download Attachment

Employment: Slower Gains, Details Reveal Heavy Seasonal Adjustments

October 8, 2021
Bottom Line:  Payroll employment in September rose much less than expected for the second month in a row, but there were upward revisions to August data that accounted for about a third of the miss.  Moreover, seasonal adjustments related to education jobs skewed the data lower.  Seasonal adjustments look at historical hiring patterns in September, but schools have been opening earlier in the year.  For instance, the seasonal adjustment factor expected over 650k public education jobs, but actual hiring was only about 500k, lower than the historical norm, likely because schools re-hired employees earlier this year.  Educated-related hiring was unusually strong in June and July (199k and 267 seasonally adjusted, respectively).  Finally, Leisure and Hostpricaly hiring was lower than expected at 74k, stronger than August but well below the average of 164k jobs over the last year.  The Delta variant likely continued to play a role in hiring in this sector, though this report contrasted notably with the ADP report, which showed more robust hiring in this sector. 
The unemployment rate fell as labor force participation fell more than expected.  That said, the employment-to-population ratio edged higher.  Average hourly earnings were up 0.6%, primarily because of a shift in the composition of workers towards more skilled sectors.  Moreover, there were negative revisions to August data that offset much of September's upside earnings surprise.
Overall, this was the second month in a row we've seen a disappointment at the headline level but better details. Looking at 3- and 6-month averages is critical, especially given the problematic seasonal adjustments in the crucial education sector.  Those averages reveal continued steady improvement in the labor market, which should be enough to allow the Fed to begin tapering in November, as they have signaled.
Payroll Employment rose by 194k in September, compared with market expectations for an increase of 870k. The prior 2 months were revised, higher in August by 131k and higher in July by 38k.
Government jobs FELL by 123k. Consequently, private sector jobs ROSE by 317k.  Private education jobs fell by 19k. State and Local education jobs fell by -161k.

Overall employment is now 4.0% ABOVE its year-ago level,  Over the past 12 months, 5,688k jobs have been created.
In September, the job gains were in:
  • Trade, Transportation & Utilities (+64k with 56k of those in Retail Trade),  
  • Professional & Business Services (+60k with a slip of 5.2k in Temp Help Services),  
  • Leisure & Hospitality (+74k),
  • Information (+32k),
  • Manufacturing (+26k),
  • Construction (+22k),
  • Education & Health Services (+12k), and
  • Financial Activities (+2k).
Jobs were shed in Other Services (-16k), and Government (-123k).
The Unemployment Rate FELL by 0.4 percentage points in September to 4.8%, compared with market expectations for a small increase to 5.7%.  Household employment rose by 526k while the labor force declined by 183k, resulting in a decrease in the number of unemployed of 710k.
The Labor Force Participation Rate FELL by 0.1 percentage points to 61.6%. The Employment-Population Ratio ROSE by  0.2 percentage points to 58.7%. The number of people Working Part-Time for Economic Reasons FELL by 8k to 4,406k. while Long-Term Unemployment FELL by 496k to 2,683k (accounting for 35.0% of the unemployed),  and the Mean Duration of Unemployment FELL by 1.2 weeks to 28.4 weeks.
There are now 7.7 million people officially unemployed. In addition, there are another 5,969k people who say they want a job but are not currently looking for one.  Finally, another 4,406k people are working part-time because of slack economic conditions.
The Index of Aggregate Hours ROSE by 0.8%, combining the solid gain in private payroll employment and the longer workweek.

Hourly Earnings
ROSE by 0.6% in September, above market expectations of 0.3%. Hourly earnings are now 4.6% ABOVE their year-ago level.

Weekly Earnings 
FELL by 100.0%, the result of the change in hourly earnings and a longer workweek. Weekly earnings are now -100.0% FALSE their year-ago level. The Average Workweek ROSE by 0.2 to 34.8 hours, ABOVE the market consensus at 34.7 hours.