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The job report exhibits fewer hires because the restoration loses momentum

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The number of non-farm workers rose by less than 661,000 expected in September and the unemployment rate stood at 7.9%, the Labor Department said in its final report on Friday ahead of the November elections.

Economists polled by Dow Jones had expected wages to grow by 800,000 and the unemployment rate cut from 8.4% in August to 8.2%. The failure with payrolls was largely due to a decline in government attitudes as home schooling continued and jobs fell at the census.

"The problem is momentum, and I think we're losing it," said Drew Matus, MetLife's chief market strategist. "When the job market is seriously disrupted, it takes time to repair itself. It doesn't matter if it's a virus."

The decline in the unemployment rate was accompanied by a 0.3 percentage point decrease in the employment rate to 61.4%, which corresponds to a decrease of almost 700,000. However, a separate, broader measure, which takes into account discouraged workers and part-time workers for economic reasons, also saw a significant decrease from 14.2% to 12.8%.

The decline in unemployment among blacks was even faster than the headline rate, falling from 13% to 12.1%. The Asian rate fell from 10.7% to 8.9%.

Recreation and hospitality added 318,000 jobs, while retail added 142,000 and health and welfare benefits increased 108,000.

As expected, the government was the biggest strain of the month, losing 216,000 due to a decline in local and state education as many schools kept teaching at home due to the virus. A reduction in census workers also pulled 34,000 out of the total.

In other sectors, health and social benefits increased by 108,000, professional and business services increased by 89,000, and transportation and storage increased by 74,000. Manufacturing grew by 66,000, financial activities by 37,000, and the other services category by 36,000.

Markets reacted little to the report as stocks are still heading for a lower open after news that President Donald Trump said he and First Lady Melania Trump had tested positive for Covid-19.

Despite the slowdown in job creation, there have been some positive signs that the economy is continuing to recover amid the pandemic.

Those who were temporarily laid off decreased by 1.5 million to 4.6 million. Part-time workers for economic reasons decreased by 1.3 million to 6.3 million, and the total number of long-term layoffs also decreased significantly.

The total number of layoffs peaked at 18.1 million as the number of employees fell by 22 million in March and April.

Permanent job losses, however, rose 345,000 to 3.8 million, a total of 2.5 million since February, the month before the World Health Organization declared the coronavirus pandemic.

"Permanent job losses rose by more than 300,000. This is not a good thing. Labor force participation has fallen, which has lowered the overall unemployment rate. That is also not a good sign," said Kathy Jones, director of fixed income at Charles Schwab. "We're seeing state and local layoffs, more permanent job losses, and more people leaving the workforce. None of this is good in the long run."

The report is amid a series of mostly positive economic signals, including strong signs from the real estate market and retail spending, and concerns that rising coronavirus cases could threaten the recovery.

While another million remain unemployed, September activity means around 12 million jobs have been restored since the economic stalemate in mid-March that saw some 22 million layoffs.

The employment sums of the previous months were revised higher. July rose by 27,000 to 1.76 million, while the already strong sum in August rose by 118,000 to 1.49 million.

The average hourly wage barely changed over the course of the month, but is still 4.6% above the previous year's figure. However, given the impact of the virus and the continuing tendency for workers with higher wages to return before those at the lower end of their jobs, hourly comparisons are difficult in the current environment.

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Katherine Clark