The U.S. labor market appear to continue its resilience with U.S. employers adding 336,000 workers in August, higher than the expected 170,000 consensus. It was the biggest hiring month since January with wage growth cooling down pleasing the Fed. There was higher unemployment, but from greater participation. The report was incongruent with the ADP Employment Report for September which grew +89K vs +153K expected the lowest in five months was released a day ahead of the BLS employment report. The jobless rate was 3.8% in September the Labor Department reported Friday. The job market is still tight, with the national unemployment rate hovering near half-century lows but this is an 18-month high.
Astonishingly last month’s payroll number was revised higher. Why astonishingly? All single monthly payrolls print in 2023 has been revised lower. June was revised down by 80,000, from +185,000 to +105,000, the original 209K has been revised 50% lower to 105K and from original expectations of 230K. BLS said “with these revisions, employment in June and July combined is 110,000 lower than previously reported.”
Wage gains exceed both their pre-pandemic pace and what Fed officials would likely see, 3.5% annual wage growth consistent with inflation near their 2% target, assuming that worker productivity grows modestly.
The resiliency of the labor market continues to raise the odds of further tightening from the Federal Reserve.
September 2023 US Employment Report
September 2023 US Employment Report and Expectations
The jobless rate was 3.8% in September the Labor Department reported Friday. The unemployment rate is higher than the pre-pandemic rate of 3.5%, which was a 50-year low. (This was bettered in Jan at 3.4%) The job market is still tight, with the national unemployment rate hovering near half-century lows but this is an 18-month high.
Highlights
Employment
- Change In Nonfarm Payrolls Sep: 336K (est 170K; prev 187K)
- Unemployment Rate Sep: 3.8% (est 3.7%; prev 3.8%)
- Labour Force Participation Rate Sep: 62.8% (est 62.8%; prev 62.8%)
- Prior two-month net revision Sep: +119K vs -110K prior
The unemployment rate and number of unemployed persons prior to the coronavirus (COVID-19) pandemic was 3.5 percent and 5.7 million, respectively, in February 2020). The number of employed persons in The United States increased to 161,484,000 in August of 2023 from 161,262,000 in July of 2023.
- Change In Private Payrolls Sep: 263K (est 160K; prev 179K)C
- Change In Manufacturing Payrolls Sep: 17K (est 5K; prev 16K)
- Household survey Sep: +86K vs +222K prior
- Underemployment Rate U6 Sep: 7.0% (prev 7.1%)
- Birth-death adjustment Sep: -119K vs +103K prior
- Long-term unemployed June: mil vs (prev 1.1m, 1.2m pre-pandemic)
- The long-term unemployed decreased to 0.66 percent in June from 0.71 percent in May of 2023.
- The employment-population ratio June 60.30% vs (prev 60.3%, 61.2% before pandemic)
Revisions Concern
Astonishingly all single monthly payrolls print in 2023 had been revised lower until August. June was revised down by 80,000, from +185,000 to +105,000, the original 209K has been revised 50% lower to 105K and from original expectations of 230K. BLS said “with these revisions, employment in June and July combined is 110,000 lower than previously reported.”
Earnings
- Average Hourly Earnings (M/M) Sep: 0.2% (est 0.3%; prev 0.2%)
- Average Hourly Earnings (Y/Y) Sep: 4.2% (est 4.3%; prev 4.3%)
- Average Weekly Hours All Employees Sep: 34.4 (est 34.4; prev 34.4)
- Payrolls benchmark NSA revision for 2022 was in Jan 23
- Payroll benchmark SA 2022 was in Jan 23
Other Employment Reports for September
- ADP report +89K vs +153K expected, prior was +177K (revised to +180K)
The market had expected the September report released Friday to show nonfarm payrolls rose 170k new jobs. September was impacted by higher interest rates and prices started to weigh on the economy. Private payroll company ADP reported that US private sector jobs grew by +89K vs +153K expected, prior was +177K (revised to +180K).
A severe labor shortage had driven up annual wage increases above 5% every month of this year until the last quarter. By contrast, wage gains averaged 3.2% in the 12 months to February 2020. Wage growth rose last month with, average hourly earnings rose by +0.2% m/m vs +0.3% expected in August from a month earlier. They were up 4.3% from a year earlier.
Employers hired across industries. Companies in certain industries that are vulnerable to interest-rate increases, such as technology and real estate, have announced layoffs. Some firms have implemented hiring freezes.
Participation
The labor force participation rate in the United States was unchanged at 62.8 percent in September 2023, the highest since February 2020, when the pandemic started to hit.
Market Reaction (Updated at Stock market open)
- The major stock indices opened lower after the much stronger than expected US jobs data but off their lowest premarket levels.
- Dow industrial average is down -60.69 points or -0.18% at 33058.89
- S&P index -16.54 points or -0.39% at 4241.64
- NASDAQ index -56.57 points or -0.43% at 13163.26
Treasury yields surged higher in response.
- 2-yr note yield up seven basis points to 5.10%.
- 10-yr note yield up 14 basis points to 4.85%.
- 30-yr bond yield up 12 basis points to 5.00%.
After Equity open yields pulled back some:
- 2-year yield 5.093% +7.1 basis points
- 5 year yield 4.788%, +10.6 basis points
- 10-year yield 4.828% +11.2 basis points
- 30 year yield 4.987% +10.0 basis points
- Crude oil up $0.40 at $82.66.
- Spot gold up $4.04 or 0.22% $1824.19
- Bitcoin trading at $27,580
Fed Funds
- The odds of a November rate hike in the Fed funds market rose to 30% from 22% yesterday.
WSJ Fed Watcher Nick Timiraos on the jobs report:
Where the Jobs Were:
Largest gains (prior month) occurring in:
- Leisure and hospitality (96K), above the average monthly gain of 61K over the prior 12 months;
- Government (73K), also above the average monthly gain of 47K over the prior 12 months;
- Health care (41K);
- Professional, scientific, and technical services (29K); and social assistance (25K).
Largest losses (prior month) occurring in:
- Employment showed little change in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; retail trade; financial activities; and other services.
Household Survey Data
The major labor market indicators from the survey of households showed little or no change over the month. The unemployment rate held at 3.8 percent in September, and the number of unemployed persons was essentially unchanged at 6.4 million.
Among the major worker groups, the unemployment rates for adult men (3.8 percent), adult women (3.1 percent), teenagers (11.6 percent), Whites (3.4 percent), Blacks (5.7 percent), Asians (2.8 percent), and Hispanics (4.6 percent) showed little or no change in September.
The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.2 million in September. The long-term unemployed accounted for 19.1 percent of all unemployed persons. Both the labor force participation rate, at 62.8 percent, and the employment-population ratio, at 60.4 percent, were unchanged over the month.
The number of persons employed part time for economic reasons, at 4.1 million, changed little in September. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs. In September, the number of persons not in the labor force who currently want a job was 5.5 million, little different from the prior month. These individuals were not counted as unemployed because they were not actively looking for work during the 4 weeks preceding the survey or were unavailable to take a job.
Among those not in the labor force who wanted a job, the number of persons marginally attached to the labor force changed little at 1.5 million in September. These individuals wanted and were available for work and had looked for a job sometime in the prior 12 months but had not looked for work in the 4 weeks preceding the survey. The number of discouraged workers, a subset of the marginally attached who believed that no jobs were available for them, also changed little over the month at 367,000.
Establishment Survey Data
Total nonfarm payroll employment rose by 336,000 in September, above the average monthly gain of 267,000 over the prior 12 months. In September, job gains occurred in leisure and hospitality; government; health care; professional, scientific, and technical services; and social assistance.
Private Jobs
- Leisure and hospitality added 96,000 jobs in September, above the average monthly gain of 61,000 over the prior 12 months. Employment in food services and drinking places rose by 61,000 over the month and has returned to its pre-pandemic February 2020 level. Accommodation employment continued to trend up over the month (+16,000) but remains below its February 2020 level by 217,000, or 10.3 percent.
- Health care added 41,000 jobs in September, compared with the average monthly gain of 53,000 over the prior 12 months. Over the month, employment continued to trend up in ambulatory health care services (+24,000), hospitals (+8,000), and nursing and residential care facilities (+8,000).
- Employment in professional, scientific, and technical services increased by 29,000 in September, in line with the average monthly gain of 27,000 over the prior 12 months.
- Social assistance added 25,000 jobs in September, about the same as the average monthly gain of 23,000 over the prior 12 months. Over the month, job growth occurred in individual and family services (+19,000).
- In September, employment in transportation and warehousing changed little (+9,000). Truck transportation added 9,000 jobs, following a decline of 25,000 in August that largely reflected a business closure. Air transportation added 5,000 jobs in September. Employment in transportation and warehousing has shown little net change over the year.
- Employment in information changed little in September (-5,000). Within the industry, employment in motion picture and sound recording industries continued to trend down (-7,000) and has declined by 45,000 since May, reflecting the impact of labor disputes.
- Employment showed little change over the month in other major industries, including mining, quarrying, and oil and gas extraction; construction; manufacturing; wholesale trade; retail trade; financial activities; and other services.
Government Jobs
Government Payrolls in the United States increased by 73k in September of 2023, following an upwardly revised 50k rise in August. Job gains occurred in state government education (29k) and in local government, excluding education (27k). Employment in government is slightly below (-9k) its February 2020 level.
Manufacturing Jobs
Manufacturing Payrolls in the United States went up by 17k in September of 2023, the biggest increase since October 2022, following a downwardly revised 11k rise in August and compared to market expectations of a 5 k gain.
Earnings
In September, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents, or 0.2 percent, to $33.88. Over the past 12 months, average hourly earnings have increased by 4.2 percent. In September, average hourly earnings of private-sector production and nonsupervisory employees rose by 6 cents, or 0.2 percent, to $29.06.
Wages Monthly
Wages Yearly
The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in September. In manufacturing, the average workweek was little changed at 40.1 hours, and overtime was unchanged at 3.1 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls remained at 33.8 hours.
Hours
The change in total nonfarm payroll employment for July was revised up by 79,000, from +157,000 to +236,000, and the change for August was revised up by 40,000, from +187,000 to +227,000. With these revisions, employment in July and August combined is 119,000 higher than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies
since the last published estimates and from the recalculation of seasonal factors.
The Employment Situation for September is scheduled to be released on November 3, 2023, at 8:30 a.m. (ET).
Source: AFP, Challenger, DOL, TradersCommunity Data, BLS
From The TradersCommunity News Desk