Delta slows growth of jobs in September
When the government released the September jobs report, my heart sank. The economy added 194,00 new positions, 300,000 fewer than expected — the smallest gain since December 2020 — and lower than the upwardly revised 366,000 in August. After talking to a bunch of economists, I learned that the news was not as bad as it had seemed at first blush.
To start, the Labor Department collects employment data in the first two weeks of the month. In September, that was precisely when the
Delta variant was surging in many parts of the country. Another factor to take into consideration is that the monthly numbers are subject to revisions. The previous two months were adjusted higher in this report, which could happen again. So far this year, job creation is averaging 561,000 per month.
Additionally, there were losses in public sector education, but that may be due to the timing of when teachers went to back to work. Economist Joel Naroff advised to look beyond the disappointing headline, because “other than volatility in the education sector, this was actually a good report, as the labor market continues to firm.”
The unemployment rate, which is calculated based on the number of people working or actively seeking employment, fell by 0.4% to 4.8%, the lowest since the pandemic began. That occurred due to a combination of people getting jobs, but also because the labor force fell by 183,000, remaining 3 million below its pre-pandemic level. Notably, the contraction in the labor force occurred despite the expiration of enhanced federal unemployment benefits for more than 6 million workers.
What is keeping would-be workers out of the job market and contributing to the labor shortages that we are seeing?
Diane Swonk, chief economist at Grant Thornton, says that in addition to COVID fears, “an acute shortage of affordable childcare, the need for upskilling and mobility constraints are the most often cited reasons for workers who remain on the sidelines.”
The labor force participation rate, which is the share of adults working or seeking work, has held at or below 61.7% since June 2020 — that’s down from 63.4% in Jan 2020. “Participation in the labor force tends to lag overall improvement in the labor market,” Swonk says.
For those who are working, the smaller labor force helped push up wages. The average hourly earnings of private-sector workers climbed
4.6% in September compared with a year earlier, which is good news for households contending with higher prices. Many are looking to the Federal Reserve to shift its policy to contain inflation, despite the slowdown shown in the September jobs report. Economists believe the central back remains on track to begin tapering its $120 billion monthly emergency bond buying program as soon as next month.
However, the Fed’s process could bump up against the debt ceiling if Congress does not act by the newly self-imposed Dec. 3 deadline. Fed Chair Jerome Powell and Treasury Secretary Janet Yellen have warned that not addressing the nation’s borrowing limit could be catastrophic to the economy, and it could force the central bank to reverse course and buy defaulted bonds if the debt ceiling were breached.
Hopefully, Congress will get its act together to avoid the break-the-glass scenarios. If so, there are likely to be renewed calls for the Fed to raise interest rates to help control inflation. Thus far, Powell has maintained that higher prices are mostly temporary, and if some of the increases remain sticky, the Fed will be able to manage them with its monetary policy toolbox. That may be “easier said than done,” Swonk says.