Sunday, October 10, 2021

A Weak Jobs Report: The Devil Is In The Details

Stocks and U.S. Treasurys fell Friday after a weak jobs report added to speculation about the Federal Reserve's plan to taper its bond-buying program. September was the slowest month for job growth this year, with just 194,000 jobs added compared to consensus estimates for a half-million, signaling a slowing of the labor market recovery and perhaps complicating the Fed's decision on when to begin scaling back monetary support. Inflation concerns pushed long-term interest rates higher, with the benchmark 10-year yield rising to 1.61% after adding 15 basis points on the week. But the three major stock market indexes finished modestly higher for the week, recovering from steep early losses after the U.S. Senate agreed to raise the debt ceiling for at least a few more weeks.

The unemployment rate fell, but so did the important labor force participation rate, which has remained within a narrow range of 61.4 percent to 61.7 percent since June 2020. And the number of people who are not in the labor force -- have no job and are not looking for one -- is the highest it's been since March.

The underemployment rate—including total unemployed and those employed part time for economic reasons, along with people who are marginally attached to the labor force—decreased to 8.5% from the prior month's 8.8% rate. Average hourly earnings rose 0.6% m/m, north of projections for a 0.4% increase, and versus August's downwardly-revised 0.4% rise. Y/Y, wages were 4.6% higher, in line with forecasts, or $30.85 per hours.  Finally, average weekly hours rose to 34.8 from August's downwardly-revised 34.6, and versus expectations to come in at 34.7 hours.

Now that most children are back in school and pandemic-related unemployment benefits have ended, more Americans returned to work last month.

The number of employed Americans increased by 526,000 to 153,680,000 in September, the fourth straight monthly increase. At the same time, the number of unemployed Americans fell sharply to 7,674,000 in September, a drop of 710,000 from August.

This produced a 4.8 percent unemployment rate, well below the 5.2 percent in August and the lowest since the pandemic began.

People are classified as unemployed if they do not have a job, have actively looked for work in the prior four weeks, and are currently available for work.

In September, the civilian non-institutional population in the United States was 261,766,000. That included all people 16 and older who did not live in an institution, such as a prison, nursing home or long-term care facility.

Of that civilian non-institutional population, 161,354,000 were participating in the labor force, meaning they either had a job or were actively seeking one during the last month. This resulted in a labor force participation rate of 61.6 percent in September -- down a tenth of a point from the 61.7 percent in the prior two months, and only 0.2 points higher than the 61.4 percent when Biden took office.

The labor force participation rate reached a Trump-era high of 63.4 percent in January 2020, just before the onset of COVID.

The number of Americans counted as not in the labor force -- meaning they didn't have a job and were not looking for one -- rose sharply in September to 100,412,000, up 338,000 from August.

BLS noted that notable job gains occurred in leisure and hospitality, in professional and business services, in retail trade, and in transportation and warehousing. Employment in public education declined over the month.

Among the major worker groups, the unemployment rates for adult men (4.7 percent), adult women (4.2 percent), Whites (4.2 percent), and Blacks (7.9 percent) declined in September.

The jobless rates for teenagers (11.5 percent), Asians (4.2 percent), and Hispanics (6.3 percent) showed little change over the month.

Clearly, the problem with employment has not fully resolved itself, causing shortages in labor, which in turn causes disruption to eh supply chain, which in turn results in inflation. 

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