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Economy in Brief

U.S. Payroll Growth Disappoints in September; Earnings Improve as Unemployment Rate Falls
by Tom Moeller  October 8, 2021

• Private sector hiring remains moderate. Government hiring drops.

• Average hourly earnings growth picks up.

• Jobless rate falls to lowest since March 2020. Labor force contracts.

The Delta virus and difficulty finding workers tempered hiring last month. Nonfarm payroll employment increased 194,000 (4.0% y/y) during September, the smallest increase since a decline in December 2020. It also was well below the 366,000 August increase, revised up from 235,000. July's gain was revised to 1.091 million from 1.053 million. A 420,000 rise had been expected in the Action Economics Forecast Survey.

Average hourly earnings rose 0.6% last month (4.6% y/y) following a 0.4% increase in August, revised from 0.6%. A 0.4% rise had been expected.

The unemployment rate declined to 4.8% in September from 5.2% in August. A 5.1% rate had been expected. The labor force fell 183,000 last month after increasing 190,000. At the same time, employment in the household survey rose 526,000 after surging 509,000 in August. The overall unemployment rate, including those who were marginally attached or working part-time for economic reasons, fell to 8.5% from 8.8%. It was the lowest level since February of last year and compared to a recession high of 22.9%.

The increase in payroll jobs last month was held back by a 123,000 decline (+0.5% y/y) in government sector hiring which followed a 34,000 increase. The number of local government jobs fell 101,000 (+2.3% y/y) after rising 37,000 in August and 268,000 in July. State government weakened 22,000 (+0.5% y/y) after a 6,000 decline but federal government hiring held steady (-7.4% y/y) after rising 3,000 in August.

Private service sector hiring rose 265,000 in September (5.1% y/y) after a 295,000 August gain. The level of hiring in trade, transportation & public utilities rose 120,000 last month (3.4% y/y) after a 47,000 increase, as hiring in retail trade gained 56,100 (2.5% y/y) after two modest monthly declines. Leisure & hospitality sector rose 74,000 (14.6% y/y) which roughly doubled the August rise. Professional & business sector employment strengthened 60,000 in September (5.4% y/y) after three months of even stronger growth. Temporary employment fell 5,200 (12.5% y/y) after a 3,700 August decline. Information services jobs rose 32,000 in September (+5.6% y/y) following a 29,000 increase while financial sector employment gained 2,000 (1.6% y/y) after an 11,000 rise. A 7,000 worker decline (+2.2% y/y) in education & health services jobs followed a 51,000 increase.

Factory sector employment rose 26,000 last month (2.7% y/y) following a 31,000 increase in August. Construction sector payrolls improved 22,000 (2.8% y/y) after holding steady in August. Employment in the mining & logging industry rose 4,000 in September (8.7% y/y) after a 6,000 gain.

Average hourly earnings strengthened 0.6% after rising 0.4%, revised from 0.6%, in August. The 4.6% y/y gain was the quickest since February. Earnings in education & health services surged 1.5% (5.8% y/y), the strongest increase in nine months. Financial sector pay rose 0.5% (5.3% y/y) after declining 0.3% in August. Earnings in the leisure & hospitality sector also rose 0.5% (10.8% y/y) following a 1.5% jump. Professional & business service sector pay rose 0.2% (4.7% y/y) after a 0.5% gain. Factory sector pay improved 0.5% (3.9% y/y) after a 0.3% rise. Construction sector earnings also firmed 0.5% (4.5% y/y) after three straight months of 0.3% increase.

The length of the average workweek lengthened to 34.8 from 34.6 hours in August. The financial sector workweek held at 37.5 hours as the information sector workweek eased to 36.9 hours, the least since November 2020. Hours-worked in the professional & business service sector slipped to 36.7 hours from a January high of 36.9 hours. The education & health services workweek rose to 33.4 hours after five months at 33 .3 hours while the leisure & hospitality workweek held at 26.2 hours. The factory sector workweek was steady at 40.4 hours while the construction workweek surged to 40.0 hours, its longest since January 2019.

From the household employment survey, the lower 4.8% unemployment rate in September occurred as the labor force participation rate eased to 61.6% and remained below the 63.4% high in January of last year. The teenage participation rate fell to 36.3% from 36.7%, but for individuals aged 20-24, it rose to 70.6% from a six-month low of 70.2%. For workers aged 25-54, the rate fell to 81.6% and remained below the January 2020 high of 83.0%. For men aged 25-54, the rate fell to 88.1%, a three-month low. For women of that age, the participation rate eased to 75.3%, down from the January 2020 high of 76.9%. For workers aged 55 & over, the participation rate rose to 38.6% but remained below the July-2019 high of 40.5%.

The employment/population ratio for all workers rose to 58.7% in September but remained well below the February 2020 high of 61.1%. A fairly steady 20.3 million worked at home because of the coronavirus, though that was 39.3% lower than the level in September 2020.

The average duration of unemployment fell to 28.4 weeks in September from 29.6 in August but remained well above 21.0 weeks twelve months earlier. The median unemployment duration fell to 13.3 weeks, down sharply from 19.8 weeks in June.

The teenage unemployment rate rose to 11.5% last month but remained below the record 32.1% in April of last year. The rate for workers aged 20-24 declined to 8.0% in September from 9.3% in August. For workers aged 25-54, the rate fell to 4.4%, and remained down from last April's high of 12.8%. For those over 55, the jobless rate declined to an expansion low of 3.6%.

By educational attainment, the rate of unemployment of workers without a high school diploma edged higher in September to 7.9% but remained below the 10.7% rate one year earlier. High school graduates without any college were a lessened 5.8% unemployed last month, down from the April 2020 high of 17.3%. Those with some college but no degree were unemployed at 4.5%, down sharply from the April 2020 peak of 15.0%. College graduates saw their unemployment rate fall to 2.5% last month but it remained above the 1.9% low in February of last year.

The employment & earnings data are collected from surveys taken each month during the week containing the 12th of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.

Employment (SA, M/M Change, 000s) Sep Aug Jul Sep Y/Y 2020 2019 2018
Payroll Employment 194 366 1,091 4.0% -5.8% 1.3% 1.6%
 Previous Estimate -- 235 1,053 -- -- -- --
  Manufacturing 26 31 57 2.7 -5.0 1.0 2.0
  Construction 22 0 12 2.8 -3.0 2.8 4.6
  Private Service-Producing 265 295 742 5.1 -6.6 1.4 1.5
  Government -123 34 275 0.5 -3.1 0.7 0.5
Average Weekly Hours - Private Sector 34.8 34.6 34.7 34.8 34.6 34.4 34.5
Private Sector Average Hourly Earnings (%) 0.6 0.4 0.4 4.6 4.8 3.3 3.0
Unemployment Rate (%) 4.8 5.2 5.4 7.8 8.1 3.7 3.9
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