Joseph G. Carson

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In September, payroll employment rose close to consensus estimates and the jobless rate dropped to a 50-year low, easing fears, at least for the moment, of a broad slump in hiring and a deep economic slowdown.

Yet, the employment headlines are misleading. The underlying details on payrolls show there is in fact a hiring slump underway, consistent with the results from recent business surveys of manufacturing and service sectors. Q3 GDP growth will be the weakest since 2015, putting downward pressure on corporate earnings.

According to the Bureau of Labor Statistics (BLS), payroll employment rose 136,000 in September, and with upward revisions to prior months payroll employment in Q3 averaged 157,000 a month, roughly matching the 152,000 gain of the prior quarter. On the surface, employment conditions look be on a steady course, and unchanged over the past several months.

However, the payrolls of nonproduction and supervisory workers, which represents the bulk of the private sector workforce accounting for over 80% of the private payroll gains in the current economic cycle dating back to 2009, paints a much weaker picture of labor market conditions.

In Q3, payrolls of production and non-supervisory workers showed an average monthly gain of 71,000 (less than half the overall payroll gain), well below the subpar average monthly gain of 98,000 in Q2, and represent the smallest quarterly gain since 2010.

Equally important is the fact that the payrolls of production and non-supervisory workers in mining, manufacturing, retail trade, utilities, leisure and hospitality showed an outright decline in Q3. And the payrolls of production and non-supervisory workers in manufacturing and retail trade also posted a decline in Q2. The last time the payrolls of production workers in manufacturing and non-supervisory workers in retail trade declined for two consecutive quarters at the same time was 2009, during the Great Financial Recession.

The big puzzle in the September employment data was the drop (0.2%) in the jobless rate to 3.5%, driven by a large gain in household employment. According to BLS, household employment rose 391,000 in September, and by 1.264 million over the past three months. The three-month gain in household employment is the second largest quarterly gain of the current economic cycle, and is nearly three times the Q3 gain in payroll employment.

Household employment is based on a separate survey of people and tends to be very volatile, with outsized gains often followed by monthly and quarterly declines. The "bridge" between the two surveys is withheld income tax receipts as tax collections are the "hardest of hard" data, capturing in real time monies taken from currently employed workers paychecks. Withheld tax receipts over the past 6 months show little growth relative to the comparable period one-year ago, indicating that payrolls, especially the figures for production and non-supervisory workers, are painting a more accurate picture of labor market conditions and the direction of the general economy.

The bottom line is that the underlying labor market conditions have weakened and business surveys confirm the slowdown in hiring and overall growth.


Viewpoint commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
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In September, payroll employment rose close to consensus estimates and the jobless rate dropped to a 50-year low, easing fears, at least for the moment, of a broad slump in hiring and a deep economic slowdown. Yet, the employment [...]

Payroll Data & Business Surveys Indicate Hiring Slump, Weak Growth And Profit Decline

Charles Steindel

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BEA has released estimates of current-dollar consumer spending by state for calendar year 2018, along with revised figures for earlier years. It's useful to keep in mind what these figures are and are not:

1. As noted, they are annual estimates, released with some considerable lag. 
2. They are estimates of overall consumer spending, not for instance, retail sales. Anybody interested in seeing how these numbers may help explain, say, state sales tax revenues, will need to make considerable adjustments. For example, the largest single component of consumer spending is owners' equivalent rent, which is not subject to sales tax! 
3. In many categories, initial estimates of state consumer spending are assumed to be tied to growth in compensation in a corresponding retail store type—obviously, a somewhat questionable assumption, though it is hard to come up with a better alternative. 

In per capita terms, DC far and away leads the nation, with an estimated $63,151 in consumption per resident in 2018. This clearly is linked to high housing costs in the nation's capital. Massachusetts is number one among true states, at $55,095. Other high-housing cost Northeastern states are in the top ranks, including New Jersey and New York (property tax payments will enter into the consumed portion of rent). Two very high cost states to live in—Hawaii and Alaska--are high in the ranks, as are North Dakota, Minnesota, and Vermont. Minnesota ranks high because spending on many services is estimated to be high. Vermont also reports high spending on services, but it's interesting to see that both the Green Mountain State and North Dakota show unusually high spending levels on goods. It may be the case that compensation of retail employees is unusually high in both places (certainly, the shale boom could have produced that situation in North Dakota), and this is reflected in high estimates of spending on many goods.

On the low side, unsurprisingly poorer states are in the bottom grouping, with Mississippi the lowest, at $31,083.
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BEA has released estimates of current-dollar consumer spending by state for calendar year 2018, along with revised figures for earlier years. It's useful to keep in mind what these figures are and are not: 1. As noted, they are annual [...]

Consumer Spending by State

USD/EUR exchange rate uncoupling from interest rate differential

Widespread downgrading of 2025 GDP outlook

Trade and fiscal policy uncertainty has exploded with the new administration

Much lower US electricity costs gives it a competitive advantage

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

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Paul L. Kasriel

The CHIPS (Creating Helpful Incentives to Produce Semiconductors) Act was signed into federal law on August 9, 2022. The CHIPS Act provides various subsidies for the production of semiconductors in the US. Semiconductors are an integral component in numerous kinds of equipment, including defense equipment. A major impetus for passing the CHIPS Act was national security.

The encouragement of domestic semiconductor production seems to be coming to fruition. In the advance estimate of Q1:2025 real GDP, released on April 30, 2025, the annualized change in the production of real information processing equipment skyrocketed to 69.3%, as shown in Chart 1.

250430X1.jpg

Those who are in the economic forecasting “profession” likely had penciled in a large increase in their forecast of Q1:2025 information processing equipment in that there was a large increase (29% annualized)  in the production of semiconductors in the Federal Reserve’s Q1:2025 industrial production report (see Chart 2). The Federal Reserve also provides monthly data on the production of semiconductors. The monthly annualized percent changes in semiconductors are plotted in Chart 3. As you can observe, in both Q1:2024 and Q1:2025, the surges in semiconductor production were “front loaded” in the sense that January increases were much larger than the subsequent February and March increases. (I’ll leave it to reader(s) as to why I am highlighting the January 2025 increase.)

250430X2.jpg

250430X3.jpg

So, we might say “mission accomplished” in terms of the CHIPS Act stimulating the domestic production of semiconductors. But the current presidential administration has indicated that it wants to scrap the CHIPS Act and replace it with tariffs on imported semiconductors. If it ain’t broke, why fix it? Subsidies or tariffs – which one would be better for aggregate economic welfare? Tariffs on semiconductors would penalize all of the consumers of the end products in which semiconductors are a component. Moreover, domestic producers of semiconductors would have an incentive to raise their prices under the umbrella of higher-priced imports subject to the tariff. Government subsidies to semiconductor producers are not free. Current or future taxpayers will bear the cost of the subsidies. But should not the cost of national security be “socialized”? My bet is the cost of the government subsidizing the semiconductor sector is less than the cost of imposing tariffs on imported semiconductors. Hmm, this might apply to other things deemed important for national security such as steel and aluminum.

Good Bye Mr. CHIPS?

The Federal Reserve Bank of Philadelphia’s state coincident indexes in March were a touch firmer than in February, but not robust. In the one-month changes, West Virginia was on top with a .77 percent gain, while South Dakota, Indiana, Montana, and South Carolina were also up more than .5 percent. Nine states were down, with Connecticut’s .23 percent drop being the largest. Over the three months ending in March, five states were down, with Massachusetts off .48 percent (Connecticut and Rhode Island also showed declines, obviously suggesting some softness in southern New England). West Virginia was up 2.06 percent, and South Carolina, Montana, Indiana, and South Dakota also rising more than 1 percent. Over the last twelve months, Iowa and Michigan were down, and twelve others saw increases of less than one percent. No state had an increase higher than four percent, and only four were at or higher than three percent. Utah’s index rose 3.33 percent, while Michigan was down 1.48 percent.

The independently estimated national estimates of growth over the last three and twelve months were, respectively, .61 and 2.44 percent. Both measures appear to be a bit weaker than the state numbers.

State Coincident Indexes in March 2025

March was another month of little change in state labor markets. The sum of payroll changes among the states was close to the national result, and revisions eliminated most of the gap initially seen for February. Six states saw statistically significant gains in jobs in March, with Pennsylvania increasing by 20,900 and Missouri up .5% (Texas reported a larger, not statistically significant, gain than Pennsylvania). A few states had insignificant declines.

Three states (Connecticut, Massachusetts, and Virginia) had statistically significant changes in their unemployment rates, with Connecticut’s .2 percentage point rise being the larges. Indiana reported a significant .2 percentage point drop. The highest unemployment rates were in Nevada (5.7%), DC (5.6%), Michigan (5.5%) California (5.3%), and Kentucky 5.2). Hawaii, Montana, Nebraska, North Dakota, South Dakota, and Vermont had unemployment rates under 3.0%, while South Dakota’s 1.8% was yet again the lowest in the nation.

Puerto Rico’s unemployment rate was unchanged at 5.3% and the island’s job count moved up by 800.

State Labor Markets in March 2025

Viewpoints: October 2019

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Payroll Data & Business Surveys Indicate Hiring Slump, Weak Growth And Profit Decline

Consumer Spending by State