The Labor Market Is Not One Number

In September, the labor market grew at a faster rate than forecasters had anticipated. Till the previous month’s report, there was a sense that the labor market was experiencing a general slowdown, with hiring slowing down, a major downward revision to the annual numbers as a result of the benchmarking exercise, and a slight uptick in unemployment rates. This month’s report puts pause on that thinking.
But having tracked the labor market for a long time, it’s important to remember that the true picture of the labor market comes from looking across several key indicators, and also tracking changes over time.

Here are some key metrics to track where some are showing improvements over time and others a marginal deterioration.

Employment: the economy added 254,000 jobs in September against an expectation of 140,000-150,000. The numbers for July and August were revised up by 72,000. Employment growth was spread across food services and drinking places, healthcare and government. Average hiring for the previous 12 months averaged 200,000.

Unemployment Rate: the unemployment rate edged down to 4.1%. This is up from 3.8% a year ago. Across demographic groups, men and women had similar unemployment rates of 3.7 and 3.6% respectively. However, there were larger differences across Whites (3.6%), Blacks (5.7%) and Hispanics (5.1%)

Number of Unemployed: the number of unemployed is currently at 6.8 million relative to 6.3 million a year ago. Within this group, those unemployed for fewer than 5 weeks is at 2.1 million, and those unemployed for longer than 27 weeks (long-term unemployed) is at 1.6 million. This is up from 1.3 million a year ago. The long-term unemployed are 24% of all unemployed.

Labor Force Participation: LFP is currently at 62.7% which is lower than pre-Covid. In February 2020, LFP was 63.3%

U-6 rate: this rate captures three categories of people (1) total unemployed (2) all persons marginally attached to the workforce (wanting work but have not looked for work in the previous 4 weeks) and (3) total employed part time for economic reasons (people who prefer full-time work but have settled for part-time work). In other words, this captures people who would like a full-time job but are currently settling for part-time work. This is at 7.7% up from 7% a year ago. During COVID, in April 2020, this was
at 22.9%.

Wage Growth: Average hourly earnings have increased by 4% year on year. With inflation at 2.5%, this suggests workers are seeing their real wages growing.

So lots to suggest a solid labor market, but also potential areas for improvement.