Under normal circumstances, adding 263,000 jobs and seeing the unemployment rate match its record low would be welcome news—but in a period of high inflation and extraordinary labor market tightness, this morning’s monthly Employment Situation report presents a more complicated picture.
“Low unemployment used to feel so good,” said Lightcast Senior Economist Ron Hetrick during the Lightcast live discussion of the jobs report. “Everybody who seems to want a job is getting a job. But we've been getting into a situation where our low unemployment rate has absolutely been a significant driver of our inflation.”
At 263,000, the number of jobs added in September is the lowest since April 2021, and is down from 315,000 last month—largely in line with economist predictions. This slope downward shows that the Federal Reserve’s efforts to cool the economy and labor market have begun to take effect.
However, the Fed has also been vocal about wanting to see the labor market loosen, and its members are looking for rising unemployment to mark that change. From that point of view, this employment situation presented a more challenging picture: the unemployment rate ticked down to 3.5%, down from 3.7% in August. This sets the stage for continuing interest-rate hikes from the central bank.
The labor force participation rate was little changed at 62.3% overall (still 1.1% below its February 2020 baseline). Just like the unemployment rate, this is an important measure of labor market tightness because it represents how many people are available to fill the millions of open jobs, and seeing it rise would show that tension start to ease. Instead, it ticked slightly down.
“We’ve been clamoring throughout the pandemic recovery for continued increases in labor force participation. And clearly we didn't see that today,” said Elizabeth Crofoot, Lightcast Senior Economist.
This challenging outlook for the broader economy has yet to have an impact on individuals, who still enjoy a robust labor market with employers in tight competition for workers. Average hourly salaries rose 10 cents in September (from $32.26 to $32.46), while annual wage growth moderated slightly from 5.0% to 5.2%.
“For most people, low unemployment is a very good thing: it means people who need jobs and want jobs have jobs,” said Lightcast Senior Economist Rucha Vankudre. “And yes, there are these larger pressures at play as the Fed raises interest rates and inflation continues, but at the same time, it’s a sign of how strong our economy is right now.”
Leisure and hospitality was the industry with the largest job gain in September, adding 83,000, followed by health, which added 60,000 and returned to its February 2020 level. Professional and business services was the other big winner, adding 46,000 jobs.
Finally, it’s worth noting that this was the last report in which the Bureau of Labor Statistics included data from a supplemental survey on the Covid-19’s impact on the labor market. Since May 2020, the monthly jobs report has reported how many people teleworked because of the pandemic, how many individuals were unable to work because their employer closed or lost business due to the pandemic, and how many people not in the labor force were prevented from looking for work because of pandemic concerns.
Compared to the first month that data was collected two and a half years ago, the teleworking number is down from 35.4% to 5.2%, the number of those affected by their employer’s lost business is down from 49.8 million to 1.4 million, and the number prevented from looking for work is down from 9.7 million to 452,000.
The overarching theme of this report was how strong the labor market remains, despite efforts to cool it and the gradual decline of new jobs added. Just as they have for months, individuals have their pick of jobs to choose from, while employers need to be increasingly deliberate about the strategies they employ to find workers.
“This is a market that’s not ready to call it quits when it comes to favoring employees,” Hetrick said.”Companies just keep asking and asking, ‘when is this battle over pay going to stop?’ Well, it'll stop when we start to see fewer people trying to hire at the same time.”
To catch up on more discussion and insight, watch the Lightcast live analysis of this morning’s report on LinkedIn.
