- by New Deal democrat
First things first: the jobs data we received this morning, like the official data reported earlier this week, is “stale news.” The period canvassed giving rise to this data was over two months ago. As such, aside from the fuller texture which it provides to us, the most important question is how well the alternative data sources accorded with this data.
In a more medium term context, even before this year, my focus had been on whether the economy would have a “soft” or “hard” landing, i.e., recession. The last two reports before the government shutdown were very much “hard landing” reports. Thus my focus now, as it would have been two months ago, is whether the more leading components, as well as the headline numbers, accord with a near term or even imminent start of a recession.
Below is my in depth synopsis.
HEADLINES:
- 119,000 jobs added. Private sector jobs increased 97,000. Government jobs rose 22,000. The three month average rose to +62,000.
- The pattern of downward revisions to previous months continued. July was revised downward by -9,000 to +70,000, and August was revised downward by -26,000 to -4,000, for a net declined of -35,000.
- The alternate, and more volatile measure in the household report, rose by 251,000 jobs. On a YoY basis, this series increased 1,843,000 jobs, or an average of 154,000 monthly.
- The U3 unemployment rate rose 0.1% to 4.4%, the highest since October 2021, but well below the “Sahm rule” threshold for confirming a recession.
- The U6 underemployment rate declined -0.1% to 8.0%.
- Further out on the spectrum, those who are not in the labor force but want a job now declined by -421,000 to 5.933 million, the lowest since May.
Leading employment indicators of a slowdown or recession
These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. For the second month in a row they were sharply negative:
- The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, rose 0.1 hours to 41.0 hours, but is down -0.6 hours from its 2021 peak of 41.6 hours.
- Manufacturing jobs decreased by -6,000, the fifth decline in a row. This series declined sharply in the second half of 2024 before stabilizing earlier this year. It is now at a 3+ year low.
- Truck driving, which had briefly rebounded earlier this year, declined -6,800.
- Construction jobs rose 19,000.
- Residential construction jobs, which are even more leading, rose 3,900, the first increase after 5 straight declines.
- Goods producing jobs as a whole rose 10,000, after declining for 4 months in a row.
- Temporary jobs, which have declined by over -650,000 since late 2022, declined again this month, by -15,900, a new post-pandemic low.
- The number of people unemployed for 5 weeks or fewer declined -249,000 to 2,227,000.
Wages of non-managerial workers
- Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.08, or +0.3%, to $31.53, for a YoY gain of +3.8%, its lowest YoY% gain in 4 years. Nevertheless, this continues to be significantly above the 3.0% YoY inflation rate through September.
Aggregate hours and wages:
- The index of aggregate hours worked for non-managerial workers rose 0.3%, and is up 1.0% YoY, about average for the past two years.
- The index of aggregate payrolls for non-managerial workers rose 0.6%, and is up 4.8% YoY, near its post-pandemic lows.
Other significant data:
- Professional and business employment declined another -20,000. These tend to be well-paying jobs. This is the fifth decline in a row, and is the lowest number in over 3 years. It is also lower YoY by -0.3%, which in the past 80+ years - until now - has almost *always* meant recession. This is vs. last spring when it was down -0.9% YoY.
- The employment population ratio rose 0.1% to 59.7%, vs. 61.1% in February 2020.
- The Labor Force Participation Rate increased +0.1% to 62.4% , vs. 63.4% in February 2020.
SUMMARY
This was a respite from the last few gloomy reports, as a number of series, most importantly the headline jobs number, rebounded nicely. Construction and goods producing jobs increased, and even government jobs increased , while discouraged workers who want a job and the short term unemployed declined sharply. Real wages and hours held steady, while real aggregate payrolls for nonsupervisory workers rose significantly. The employment population and labor force participation rates also rose. Of note, the headline number for private employment rose by more than all of the alternative data sets that were necessary to use during the shutdown.
But there were negative signs as well. Manufacturing continued to shed jobs, as did trucking, temporary help, and professional and business jobs. The unemployment rate also rose to a new multi-year high, although this was in large part due to the sharp increase in the labor force. Also of note, this report confirmed two negative readings in the last five months. During those five months, payrolls have risen only 193,000 in total, or 38,600 per month on average.
All things considered, this was a positive - if stale - report.
