Today’s jobs report brought mostly good news for America’s workers. The Bureau of Labor Statistics found the labor market grew robustly in September. Employers added a quarter-million net new jobs and the unemployment rate fell 0.2 percentage points to 5.9 percent.
However, the details of the report contained some cautionary notes that make it too early to start celebrating.
The payroll survey reported employers added 248,000 net new jobs in September. The professional and business services (+81,000), retail trade (+35,000), leisure and hospitality (+33,000) and healthcare (+23,000) sectors led the way in job growth. The mining sector also continued to show strong growth, adding another 9,000 jobs. Revisions to the July and August estimates also showed employers created almost 70,000 more jobs those months than previously known.
These job gains may represent hiring catching up to the companies posting more job vacancies. The number of job vacancies has jumped by a fifth since the start of the year. The average workweek also ticked up 0.1 hour to 34.6 hours—the highest level since May 2008.
Despite this good news the payroll survey also reported that average hourly earnings fell 1¢ to $24.53 an hour. Over the past year average hourly earnings have grown just 2 percent–just a half-percentage point faster than inflation. Employers apparently see little need to raise real wages to attract employees. Many workers understandably feel the recovery has passed them by.
The separate household survey also reported good news, with a few cautionary notes. The survey showed total unemployment falling sharply (-329,000). It fell because both the number of workers (+232,000) and number of Americans outside the labor force (+315,000) surged. Neither workers (obviously) nor those no longer looking for work count as unemployed. Both these factors caused the unemployed rate to drop below 6 percent for the first time in six years.
Despite this good news, the labor force participation rate dropped slightly to 62.7 percent–a new post-1970s low. The employment-to-population ratio also remained flat (59.0 percent) for the fourth consecutive month. The strong headline job growth and unemployment figures in recent months have not translated into an increase in the proportion of Americans with jobs.
One possible explanation for this is that falling labor force participation reflects an ageing society. A strong labor market would not necessarily translate into greater total employment if millions more retirees have left the labor force. But further analysis shows this does not explain the problem. The employment-to-population ratio among 25-54 year olds actually fell in September, dropping from 76.8 to 76.7 percent—no higher than it stood six months ago. Growth in employment rates remains anemic even for Americans in the prime of their working years.
The takeaway? The labor market has clearly improved this year. But it also remains far weaker than the headline figures suggest. American workers could definitely use a more robust recovery.
