Two economists breakdown September's surprising jobs report

The U.S. economy created jobs at a much slower-than-expected pace in September, a pessimistic sign about the state of the economy though the total was held back substantially by a sharp drop in government employment.

Nonfarm payrolls rose by just 194,000 in the month, compared with the Dow Jones estimate of 500,000, the Labor Department reported Friday. The unemployment rate fell to 4.8%, better than the expectation for 5.1% and the lowest since February 2020.

The headline number was hurt by a 123,000 decline in government payrolls, while private payrolls increased by 317,000.

The drop in the jobless rate came as the labor force participation rate edged lower, meaning more people who were sidelined during the coronavirus pandemic have returned to the workforce. A more encompassing number that also includes so-called discouraged workers and those holding part-time jobs for economic reasons declined to 8.5%, also a pandemic-era low.

“This is quite a deflating report,” said Nick Bunker, economic research director at job placement site Indeed. “This year has been one of false dawns for the labor market. Demand for workers is strong and millions of people want to return to work, but employment growth has yet to find its footing.”

Nevertheless, markets reacted little to the news, with Dow futures around flat for the morning and government bond yields mixed as investors digested what was a mixed bag of a report.

Despite the weak jobs total, wages increased sharply. The monthly gain of 0.6% pushed the year-over-year rise to 4.6% as companies use wage increases to combat the persistent labor shortage. The available workforce declined by 183,000 in September and is 3.1 million shy of where it was in February 2020, just before the pandemic was declared.

“Labor shortages are continuing to put severe upward pressure on wages ... at a time when the return of low-wage leisure and hospitality workers should be depressing the average,” wrote Andrew Hunter, senior U.S. economist at Capital Economics.

Leisure and hospitality again led job creation, adding 74,000 positions, as the unemployment rate for the sector plunged to 7.7% from 9.1%. Professional and business services contributed 60,000 while retail increased by 56,000.

Job gains were spread across a variety of other sectors: Transportation and warehousing (47,000), information (32,000), social assistance (30,000), manufacturing (26,000), construction (22,000) and wholesale trade (17,000).

Local government education jobs fell by 144,000, which may have been due to seasonal adjustments in the numbers, according to Gus Faucher, chief economist at PNC.

The survey week of Sept. 12 came just as Covid cases were peaking in the U.S. The delta variant spread since has cooled, with cases most recently dropping below an average of 100,000 a day.

Unemployment for Blacks fell to 7.9% from 8.8%, due largely to a drop to 66% from 66.7% in the labor force participation rate for males.

There was some good news in Friday’s report from previous months.

July’s already-strong gains were revised higher by 38,000 to 1.0913 million, while August’s big letdown also was revised up, to 366,000 from the initially reported 235,000.

The employment-to-population level increased to 58.7%, its highest since March 2020.

The report comes at a critical time for the economy, with recent data showing solid consumer spending despite rising prices, growth in the manufacturing and services sector, and surging housing costs.

Turn to CNBC TV for the latest stock market news and analysis. From market futures to live price updates CNBC is the leader in business news worldwide.


Connect with CNBC News Online

#CNBC
#CNBCTV

[kanibeMe]

If these numbers surprised you, then you probably shouldn't be an economist.

[evolutionistheflyingspaghe]

“Come on, man, let’s make it simple! Brandon’s “presidency” is a train wreck!💥🚂

[LUKE]

Work sucks. FIRE movement. Been living out of my car stacking money for 3 years now. Six figures at 28, debt free, part time work from here on out.

[rigosanchez]

I quit my job cause they expect me to work 3 times as hard for the same wage. Unacceptable

[FireForEffect]

Pouring too much sugar on a complete disaster.

[discovertheninthplanet]

Does it feel like some employers keep asking for Phd for entry level jobs?...

[TheAlniceg]

Let’s all be honest here, they should’ve let TRUMP win the election. We wouldn’t be in this mess. 🤷‍♂️😔

[sherrybeckley]

🤔Could it be the force mandates? Why are we not asking that question?

[pjcanseco]

This makes the Democrats look like a bunch of amateurs.

[andrewnielsen]

A lot of talking with no real facts or conclusions. Thanks CNBC.

[cayminlast]

Pay attention, higher corporate taxes and a rise in minimum wages will export jobs, cheaper labor costs and the new free trade legislation are a huge incentive.

[bart]

Are they Counting the 2 Million Illegal Immigrants?

[discovertheninthplanet]

Are they counting only paid or unpaid as well? Any statistics on unpaid internships?

[robroberts]

Former students of the joe Biden school of economics.

[PM-pcql]

Just a guess.
Most of these PMSCNBC people voted for Biden.
Just my opinion on all the previous predictions.

[ChalrieD]

In the end $15 minimum wage with a public option will look a bargain.

[mmahan]

If I "liked" this does this mean I'm LMAO at Joe Biden and the Dims

[pauls]

I see in my area the same employers are posting the same jobs on a weekly basis. Either these places are not getting any interest or they are being picky. Another thing I noticed is many of these jobs are asking for expected salary. Are they hiring the best or cheapest

[willsweat]

Ms. Richardson and Mr. Goolsbee's partisanship is showing. Funny how they seem to find nice reasons (if not contorted) when the report doesn't support the political position they hold. Course everyone does it but that doesn't mean it isn't still funny.

[jacobfaro]

So does the jobs report show overall (added minus lost) or just gross jobs added?