The Labor Market Is Not One Number

The labor market has seen big swings over the previous few months. In August, employment increased by 78,000, suggesting 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. In September, the gain was 254,000 (now revised down to 223,000), putting a pause on that thinking. Now, the October numbers suggest a weak labor market again, with employment moving up by a paltry 12,000, well below forecasters expectations of 100,000 job gains. This is why it’s really important to not focus too much on one month’s report. Equally importantly, remember that the true picture of the labor market comes from looking across several key indicators. 

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

Employment: the economy added 12,000 jobs in September against an expectation of 100,000. The numbers for August and September were revised down by 112,000. Employment growth was spread across healthcare and government. Employment gains for the previous 12 months averaged about 194,000. Employment declines are likely due to the Boeing strike, and also the impact of hurricanes, suggesting that some of the job losses are temporary and likely to get reversed next month.

Unemployment Rate: the unemployment rate stayed steady at 4.1%. This is up from 3.8% a year ago. Across demographic groups, men and women had unemployment rates of 3.9 and 3.6% respectively. However, there were larger differences across Whites (3.8%), Blacks (5.7%) and Hispanics (5.1%)

Number of Unemployed: the number of unemployed is currently at 7 million relative to 6.4 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 23% of all unemployed.

Labor Force Participation: LFP is currently at 62.6% 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). The U-6 rate is at 7.7% up from 6.8% 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 2.1%, this suggests workers are seeing real wages growing.

This snapshot suggests a slight weakening of the labor market this month, but potentially due to temporary factors.