The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Senior Economist Daniel Zhao.
Today’s jobs report shows the labor market recovery decelerated in September, adding 194,000 jobs, well below expectations, below the 366,000 jobs added in August, and a significant slowdown from the 1,091,000 added in July. The unemployment rate dropped to 4.8 percent, continuing to improve despite slow payroll gains. Despite the weak growth in September, today’s report is a glimpse in the rearview mirror. With the Delta variant wave receding, the worst of the Delta wave may be behind us.
Payroll Growth Falls to 194,000 in September
Employers added just 194,000 jobs to payrolls in September, in line with expectations. Payrolls are still 4,970,000 below pre-pandemic levels. At September’s pace, it would take over two years to return to pre-pandemic job levels.
Leisure & hospitality slowed to a crawl in August, with 38,000 jobs added and was similarly sluggish in September, with 74,000 jobs added. Government payrolls fell by 123,000 as the Delta variant disrupted school reopenings and crimped hiring. The seasonal adjustment likely overstated losses in education, which is running with a leaner workforce during the pandemic and may regain some jobs as school reopenings resume later in the coming months.
Unemployment Drops to 4.8 Percent, Temporary Layoffs Resume Decline
The unemployment rate fell to 4.8 percent in September, stepping down from 5.2 percent in August. Workers unemployed on temporary layoff resumed their decline, falling to 1,124,000 in September as the furloughed began returning to work. The number of temporary layoffs are still elevated above pre-pandemic levels, but job gains will have to come increasingly from the permanently laid off or out of the labor force to sustain further job gains.
Pay Growth in Leisure & Hospitality Simmers Down
Average hourly earnings in leisure & hospitality for production & non-supervisory workers fell slightly 0.7 percent month-over-month in September, decelerating from 0.8 percent in August. Combined with weak hiring in leisure & hospitality in September, the slowing pace of pay growth points to subdued demand for workers as the Delta variant disrupted plans for Americans going out to eat or travel.
Remote Work Resumes Downward Trend as Delta Recedes
The share of American workers working remotely at some point over the last four weeks dropped to 13.2 percent, down slightly from 13.4 percent in August and ending the short-lived bump in remote work from the Delta wave. While remote work continues to be a feature of the new normal in today’s labor market, access is continuing to drop as more companies reopen their offices.
Unemployment Benefit Expiration Disappoints in September
September’s jobs report is the first after the Labor Day expiration of federal enhanced unemployment benefits. The decelerating jobs growth in September is likely to disappoint employers and policymakers that hoped the expiration of enhanced UI benefits would push Americans back into the labor force. So far, evidence continues to suggest that the positive impact from withdrawal/expiration on jobs growth is relatively muted, though it may increase as the year continues and savings are depleted. Ultimately, the September report will not be the final word in the debate over the impact of UI benefits.
Recovery in the Coming Months
The September jobs report is a glimpse in the rearview mirror. Despite the soft September report, there’s still a case for optimism in the coming months. Cases of COVID-19 have dropped significantly since the beginning of September and the labor market is likely to return to the same place it was before the Delta surge. Many employers are still competing heavily for workers amid a severe imbalance in labor supply and demand and that is unlikely to change any time soon. As we head into the fall, the resumption of school reopenings and expiration of UI benefits may push some workers back into the labor force, but red-hot labor demand is likely to keep labor shortages top of mind for employers.
Payroll growth slowed to 194,000 in September. August’s upward revisions to 366,000 help, but we’re clearly experiencing a significant Delta slump. Hopefully, with the Delta wave receding, this will be the worst of the slowdown.
Private payroll growth was largely unchanged in September (+317,000, from +332,000 in August). It’s really government job losses (-123,000) that slowed gains.
The bottom right panel shows how enormous the non-seasonally-adjusted swings in government jobs are due to the school year. This makes it difficult to forecast job gains around the start and end of the school year. Seasonal swings are likely smaller in 2021 due to leaner pandemic workforces in schools. Delayed school reopenings have also likely crimped hiring for schools.
The seasonally-adjusted job losses in education are not necessarily a worry for September. In the above chart, you can see that we saw the same pattern in 2020 due to the seasonal adjustment. The real worry is job losses in education over the course of the pandemic are still significant. The below chart shows the industries with the largest remaining shortfalls in payroll employment are still leisure & hospitality, education & health services (includes private education), and government (includes state & local education).
Thus far, payroll employment has recovered much faster than in previous recessions, but at September’s pace, it would take another 25 months to recover to pre-pandemic levels. Thankfully, it does seem like we’ll get faster growth in the coming months.
The job losses by industry highlight that education was really the driver of weakness in September. Leisure & hospitality job gains were weaker than usual, but broad-based job gains elsewhere are encouraging.
Annual wage growth for production & nonsupervisory employees in leisure & hospitality was largely flat in September. Wage growth flat at 12.9 percent year-over-year though indicates that demand for workers is still red-hot despite the Delta slowdown.
On the household survey: the unemployment rate dropped to 4.8 percent despite weak payroll growth. Labor force participation dipped slightly, but the improvement was still largely due to more Americans finding jobs.
Temporary and permanent layoffs both fell. Temporary layoffs fell to 1.1 million from 1.2 million. Permanent job losers fell to 2.3 million from 2.5 million. While temporary layoffs are still elevated, future job gains will have to come increasingly from permanent job losers.
The Black unemployment rate dropped to 7.9 percent after a big jump in August. Improvement is encouraging though it has been inconsistent during the recovery, and there’s still a long way to go to close the gap.
The teen unemployment rate was one of the few unemployment rates to rise in August and is getting closer to pre-pandemic levels, perhaps suggesting the end of pandemic trends (e.g. school closures, UI benefits) that may have boosted teen work.
Remote work due to Covid was largely flat in Sep as the Delta wave peaked. This share is likely to drop in coming months as offices reopen.
As a reminder, access to remote work is still primarily concentrated in office-based, higher-income occupations. Many workers across the United States in frontline service or goods-producing occupations simply do not have access to remote work options.