Insights and Perspectives

The Bureau of Labor Statistics (BLS) released its monthly Current Employment Statistics (CES) report and Current Population Survey (CPS) for September 2021 on Friday, October 8^th. The monthly change in employment given by the CES and the unemployment rate from the CPS are seen as the standard gauges for assessing the health of the U.S. labor market. The results mark 19 months since the Covid-19 economic lockdown.

Employment in the U.S. rose by 194,000 jobs, well below the Geographic Solutions, Inc. forecast of 461,000. However, it still outperformed the WSJ Economist Survey projection of 500,000 jobs. The results are disappointing and appear to be chiefly driven by seasonal adjustments of local education employment, which were mostly derived before the pandemic, and lingering fears of the spread of the Covid-19 Delta variant. This has led some states and localities to reinstate restrictions on activity as well as individuals self-limiting their activities. The Geographic Solutions forecast was derived from internal data on the number of job openings and job searchers. The forecast uses unemployment claims data from the U.S. Department of Labor (USDOL).

The unemployment rate dropped to 4.8%, below the Geographic Solutions forecast of 5.3% and the WSJ forecast of 5.1%. The likely cause of such a decrease was many states ending their extended pandemic unemployment benefits. The unemployment rate forecast used internal data on job openings, job severances, job searchers, and the number of applications for unemployment benefits filed on Geographic Solutions state client sites. The forecast uses unemployment claims data from the USDOL.

Job creation was strongest in Trade, Transportation, & Utilities (120,000), including 27,000 in Clothing and Clothing Accessories Stores. Professional & Business Services grew by roughly half that with 60,000 new jobs for the month. Leisure & Hospitality which had been a major source of job growth during the recovery expanded by only 74,000 jobs in September.  Government and Education & Health Services employment fell. These were mostly due to the drop in education jobs in the private and public sector which had a combined loss of 180,000.  September is typically a strong month in this category, so the seasonal adjustments apply a large reduction to education employment at that time.  However, with the unusual pattern of this employment since the Covid-19 outbreak, this adjustment may no longer present an accurate portrayal of jobs in education.

After aggressively catching up to other sectors, Leisure & Hospitality employment has been weak the last two months. Employment in this area is still down 9.4% from its pre-pandemic level, far greater than any other industry.

The U-3 unemployment rate is the standard form of measuring unemployment in the U.S. labor market and includes those that are actively seeking a job but unable to find one. The U-3 unemployment rate declined to 4.8% from the previous month.

The labor force participation rate ticked lower to 61.6% from the previous month. The more expansive U-6 unemployment rate counts discouraged workers who are no longer actively seeking work (and therefore no longer in the labor force) and those that have settled for part-time employment but desire a full-time job. This measure of unemployment fell 0.3% to 8.5%. Declines in the unemployment rates with a steady labor force participation rate along with weak job numbers in the CES report indicate that there were gains among the self-employed and gig economy workers who are not counted in non-farm payrolls in the CES report.

After encouraging job growth in June and July of approximately 2 million, the labor market entered a soft patch in August and September with only 500,000 new jobs.  The performance over the last four months underscores the uneven pace of growth.  The good news is that case counts from Covid-19 are in decline, and most schools are in session now which should have a favorable impact on October employment.