September Job Growth Weakest This Year

September Job Growth Weakest This Year

Battered by a wave of Covid-19 infections and a major storm in the Southeast, the U.S. economy added just 194,000 jobs in September, the Labor Department announced Friday, falling well short of economists’ expectations for an increase of 500,000 or more. The month saw the weakest pace of job growth this year.

Despite the disappointing job numbers, the unemployment rate fell to 4.8%, down from 5.2% in August. But that decrease was driven in large part by workers leaving the labor force and no longer being counted as unemployed.

“With the expiration of enhanced jobless benefits, rising vaccination rates and higher wages, many economists predicted that workers would resume the job search,” The Wall Street Journal’s Josh Mitchell reports. “But last month, the labor-force participation rate—or the share of workers with a job or actively looking for one—dipped slightly to 61.6%, down from 63.3% in February 2020 ahead of the pandemic.”

Businesses are still reporting a lack of workers, at least at the wages they are willing to pay, and worker reluctance to return to the labor market appears to be playing a role in the disappointing job growth.

“This was the time when a lot of people were expecting labor shortages to be getting better, but in fact they’re getting worse,” said Michael Pearce of Capital Economics. “It’s a pretty worrying situation.”

Economist Justin Wolfers summed up the worry succinctly: “The recovery has stalled,” he tweeted. “We're missing about 8 million jobs, and at this rate, we're not bringing them back any time soon.”

Biden heralds progress, calls for more investment: The White House put a positive spin on the report, with President Joe Biden heralding the drop in the unemployment rate. “Today’s report has the unemployment rate down to 4.8%, a significant improvement from when I took office and a sign that our recovery is moving forward, even in the face of a Covid pandemic,” Biden said.

“Right now, things in Washington — as you all know — are awfully noisy,” Biden added. “When you take a step back and look at what’s happening, we’re actually making real progress.”

At the same time, Biden said the jobs report highlights the need to pass his plan to invest in the economy. Saying the U.S. has fallen behind in the world in areas like infrastructure and education, Biden said, “we have taken out foot off the gas and the world has taken notice.”

House Speaker Nancy Pelosi (D-CA) echoed the theme, saying the latest job report shows the need to move forward with the public investments Democrats have proposed. “The September jobs report is additional proof of the need for House Democrats’ jobs-creating #BuildBackBetter agenda,” Pelosi tweeted. “While historic progress to create jobs, lower unemployment and defeat the pandemic has been forged, more must be done to protect families’ financial security.”

Unemployment benefits not a factor: The federal program providing enhanced unemployment benefits was terminated nationwide in early September, but that doesn’t appear to have pushed workers back into the labor market, as some economists had argued it would. Although it’s too early to draw any firm conclusions, the numbers seem to confirm that Covid-19 has played a bigger role in keeping workers on the sidelines than unusually generous aid for the unemployed.

Joseph Brusuelas, chief economist at the consulting firm RSM, told The Washington Post that the monthly results should be taken with caution, given the one-time events that appear to have weighed on the month. “What I see is Hurricane Ida that delayed reopening of schools and day-care centers, contributing to the weaker than anticipated total change,” Brusuelas said.

A decline in public-sector jobs was notable, with the sector losing 123,000 jobs last month, mostly in schools.

One eye on inflation: Wage growth was significant in September, with average hourly earnings rising 0.6% on a monthly basis, which translates to 4.6% on an annual basis. The numbers provide another piece of data for those who are concerned that inflation may be more persistent than the Biden administration and the Federal Reserve have predicted. They could also provide more ammunition for those who cite inflation concerns in their battle to trim or defeat Democrats’ $3.5 trillion public spending plan.