Gregory Heym is Chief Economist at Brown Harris Stevens. His weekly series, The Line, covers new developments to the economy, including trends and forecasts. Read on for the latest report and subscribe here to receive The Line in your inbox.
The headline number of only 194,000 jobs added last month certainly sounds terrible, especially since economists were looking for a gain of 500,000. This represents the weakest job growth for any month this year. With a record 11 million job openings out there, and the end of the federal unemployment benefits last month, many expected September would be the month job creation thrived.
Wages did rise 4.6% over the past year, but the 5.3% annual rate of inflation means real wages are falling in the U.S. Way to go Fed Chairman Powell, do you still think inflation is transitory?
So, what happened?
Some of this can be blamed on the Delta variant, which has kept many from rejoining the workforce. And even with the end of federal unemployment benefits, the U.S. is still sending checks to millions of Americans, while President Biden is pushing for trillions more in spending. This is certainly preventing many from looking for work at a time when companies are so desperate to hire.
Did I mention there was some good news?
The unemployment rate fell by 0.4% to 4.8%, lower than the 5.1% forecast.
Private-sector employment rose by 317,000 jobs last month, while government jobs fell by 123,000.
There were revisions to the July (+38,000) and August (+131,000) figures, which added a total of 169,000 jobs.
So far in 2021, monthly job growth has averaged 561,000.
The current unemployment rate is just 1.3% higher than before the pandemic, and total employment is just 3.3% – below the pre-pandemic level.
The current unemployment rate is just 1.3% higher than before the pandemic, and total employment is just 3.3% – below the pre-pandemic level.
Hopefully that cheered you up. However, a serious disconnect remains in the labor market. Why is hiring so weak when there are a currently a record number of job openings? We will continue to debate this, but to me the biggest drag on hiring right now is the unprecedented level of federal stimulus, which is keeping the labor participation rate at 61.6%. Prior to the COVID-19 pandemic, the last time this rate was that low was January 1977.