Jobless Rate Slides Back to 7.9% in September

The Labor Department reported that nonfarm payrolls rose by 661,000 in September and that the unemployment rate fell to 7.9% from 8.4%. This suggests that the employment recovery from the unprecedented COVID-related drop in March and April continues. Roughly 11.4 million jobs have now been recovered during the May to September period. Nonetheless, the level of payrolls remains about 10.8 million below where it was in February (7.0% below). 

The September jobs report is the last such report before the November 3^rd presidential election and has thus taken on additional political significance. Despite the employment gain in September, jobs remain well below their pre-pandemic levels in February. Many economists continue to urge Congress and the White House to implement further fiscal stimulus to keep the recovery on track. Some anticipate that without a fiscal stimulus package the recession will deepen further. Moreover, uncertainty about the path of the COVID-19 virus as we enter the fall and winter months as well as the lack of a vaccine continue to weigh on business owners hiring decisions. Finally, the announcement that President Trump has tested positive for COVID-19 has added more uncertainty and may further complicate hiring patterns.

The 661,000 job gain in August was much smaller than in the prior three months. Market expectations had been for a gain of 859,000.  

Health care added 53,000 jobs in September, with gains in offices of physician, dentists, hospitals, and home health care services.  

The 0.5 percentage point drop in the September unemployment rate to 7.9% was good news but is still well above the pre-pandemic level of 3.5% seen in February. Jobless rates fell for adult men (7.4%), adult women (7.7%), Whites (7.0%) and Asians (8.9%). The jobless rates for teenagers (15.9%), Blacks (12.1%) and Hispanics (10.3%) showed little change over the months. The number of unemployed persons fell by 1.0 million to 12.6 million.  

The number of long-term unemployed (those jobless for 27 weeks or more) increased by 781,000 to 2.4 million, a figure that suggests that it continues to be a very challenging time for a number of Americans. Moreover, a separate report issued yesterday on unemployment insurance claims showed that more than 26 million workers remain on government assistance in the week ended September 12.  

The underemployment rate or the U-6 jobless rate fell to 12.8% in September from 14.2% in August. This figure includes those who have quit looking for a job because they are discouraged about their prospects and people working part-time but desiring a full work week. In the previous 2008/2009 recession, this rate peaked at 17.2%.  

Average hourly earnings for all employees on private nonfarm payrolls rose by $0.02 in September to $29.47, a gain of 4.7% from a year earlier. The large employment fluctuations over the past several months, especially in industries with lower-paid workers—complicate the analysis of recent trends in average hourly earnings. 

The labor force participation rate, which is a measure of the share of working age people who are employed or looking for work decreased 0.3 percentage point in September to 61.4% and is 2.0 percentage points lower than in February.  

The change in total nonfarm payroll employment for July was revised up by 27,000 from 1,734,000 to 1,761,000 and the change for August was revised up by 118,000 from 1,371,000 to 1,489,000. Combined, 145,000 jobs were added to the original estimates. Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.

While the September improvement is welcome news, the labor market continues to be strained and the recent spike in the virus across many states could hamper further gains. Indeed, some states are backtracking plans to reopen as coronavirus infections are rising again.