The U.S. economy added 661,000 jobs in September and the unemployment rate fell to 7.9 percent, indicating that the economy continued to add jobs even as coronavirus infections rose across many states.
Economists had forecast an addition of around 800,0000 jobs and a decline in the unemployment rate to 8.2 percent from 8.4 percent last month. So Friday’s figures missed on job creation but beat on the unemployment rate.
“The easy part of the labor market recovery is largely behind us now. A lot of jobs still came back in September but the pace of improvement is clearly slowing. The sobering statistic here is that 36% of unemployed are now classed as permanent job losers, up from 14% in May,” said Brian Coulton, Fitch Chief Economist.
There was a huge decline in education employment and government jobs. Government employment overall declined by 216,000 in September. Employment in local government education fell by 231,000 and state government education fell by 49,000. A decrease of 34,000 in federal government was driven by a decline in the number of temporary Census 2020 workers.
Seasonal adjustments played a large role in the decline in educational employment. The numbers above are seasonally adjusted figures, the standard way of presenting job gains and losses. In September, the seasonal adjustment for education assumes massive hiring at the start of the school year. The unadjusted figure for local government education shows nearly 900,000 jobs added, instead of the 231,000 jobs lost. What that means, really, is that we added far fewer jobs than expected in local educational employers, likely because so many schools are shuttered and children are studying remotely.
Manufacturing added 66,000 jobs over the month, the fifth straight monthly gain. That is a more than a respectable showing for this sector and well above forecasts for a gain of 33,000. Durable goods accounted for about two-thirds of the gain, led by motor vehicles and parts and machinery. Despite gains over the past 5 months, employment in manufacturing is 647,000 below February’s level.
In another positive sign for the economy, the average workweek for all employees on private nonfarm payrolls rose by 0.1 hour to 34.7 hours in September. In manufacturing, the workweek rose by 0.2 hour to 40.2 hours, and overtime decreased by 0.1 hour to 2.9 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls rose by 0.1 hour to 34.1 hours.
The figures for July and August were revised up to show the economy added 145,000 more than previously reported in those two months combined.
On the other hand, the labor force participation rate decreased by 0.3 percentage point to 61.4 percent in September and is 2.0 percentage points lower than in February. It is possible the participation rate was pushed down by people dropping out of the labor force after their access to unemployment benefits ended after several months of joblessness.
In September, average hourly earnings for all employees on private nonfarm payrolls, at $29.47, held steady, as did wages for production and non-supervisory workers.
The economy has added around 11 million jobs in the past five months, a record breaking pace. The increase in the ranks of employed workers shows that companies ramped up hiring as the economy reopened and consumers came back to stores, restaurants, and other businesses that had been shuttered in March and April. Despite the gains, total employment in August was lower than its February level, highlighting just how deep the pandemic cut into what had been the strongest jobs markets in decades.
Unemployment is rising in Europe, where government programs had kept may workers in their jobs in the early weeks and months of the pandemic. In August, the unemployment rate rose to 8.1 percent, the fifth straight monthly increase.
A report on private payrolls from ADP and Moody’s Analytics on Wednesday estimated that businesses increased their workforces by just 749,000 million in September, better than the consensus forecast. The ADP reports have been wildly off in recent months, apparently unable to correctly anticipate the impact of the reopening of the economy.
The Trump administration’s aid programs appear to have worked to stave off economic disaster in the face of the coronavirus pandemic. Direct relief payments to taxpayers and enhanced unemployment kept up incomes despite the huge rise in unemployment, which in turn has boosted demand for consumer products. The Paycheck Protection Program, which provides forgivable loans to small businesses that avoid layoffs, also seems to have supported employment and rehiring.
Those programs, however, have largely run their course. The $600 a week enhancement to unemployment benefits expired a month ago. The Paycheck Protection Program was meant to support employment for just a few months and most of the funds are now exhausted. Negotiations to re-up the programs stalled on Capitol Hill due to fierce resistance by House Speaker Nancy Pelosi and other Democrats to reaching any deal with the Trump administration and House Republicans.
President Donald Trump has used executive orders to maintain federal support for unemployment benefits and the CDC has announced an emergency ban on evictions.