Today’s solid jobs report contains some of what the FED wants to see—solid job gains and cooling wage growth—but not what it wants to see most, improvement in labor supply.
- September’s employment gain was lower than August’s and the smallest since April 2021, but still a very healthy 60% larger than the 2019 monthly average gain.
- Wage growth moderated to 5% annually, with a substantial decline in wage growth for leisure and hospitality employees.
- Constrained labor supply remained a drag on employment growth, as well as a driver of wage growth and inflation. There were 57k fewer people in the labor force in September, and the overall participation rate ticked downwards. Many observers had been expecting that women would return in large numbers with the reopening of schools this school year, but instead the number of women in the labor force declined substantially (-432k). One reason for weaker participation may be the decline in employment in child day care services (-2k).
Job gains remained broad-based, although the economy is starting to become a tale of two job markets:
- In several industries, jobs are still roaring back—such as in health care (+60.1k), which fully recovered to its pre-pandemic staffing level; food services and drinking places (+60k); and arts, entertainment, and recreation (+16.3k).
- In a growing set of industries that are disproportionately affected by high interest rates, low stock prices, and a strong dollar, employers are starting to make some cuts—such as in finance and insurance (-13k), residential construction (-0.1k), building material and garden supply stores (-6.1k), car dealerships (-1.8k), and advertising and related services (-4.7k).
Worryingly, government education, which still has 309k fewer employees than before the pandemic, failed to make up the gap and rather moved in the wrong direction.
- Public schools continue to struggle to compete for workers in a supply-constrained environment. The public sector has lagged behind the private sector when it comes to wage growth.
Jobs report recession watch: There are several leading indicators of recessions in the jobs report, and ZipRecruiter is monitoring them closely. So far, they do not point to a recession in the labor market.
- Employment in temporary help services typically declines in the months leading up to a recession, but grew by +27.1k.
- When business conditions slacken, employers often reduce workers’ hours before trimming headcount. Average weekly hours (34.5 hours/week) held steady in September, and the number of people working part-time for economic reasons fell (-306k).