U.S. Jobs: September Slump Is Actually Good News?

As inflation dipped ever so slightly from July to August (8.5 to 8.3 percent) — it tracks a month behind the jobs numbers — hiring showed a welcome decline from August to September. In the latter case, the big number went from 315,000 in August (unchanged in the latest employment summary) to 263,000 in September.

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The latest corrected quarterly results were 537,000 for July (upped by 11,000 from last month), 315,000 for August, and 263,000 for September. That makes the monthly average for that quarter more than 371,000, and clearly illustrates a downward trend in hiring. Surprisingly for some, this comes as good economic news.

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What Makes Declining Job Growth Good News?

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Given that inflation is still way above the Federal Reserve’s two percent target, too much job growth can provide an easy explanation as to what’s driving that bus. Granted, September inflation numbers won’t be available until the end of next week (Oct. 13). But they’re still likely to show something in the 7-to-8 percent range given the current state of prices and the economy.

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At 263,000 jobs added for September, that’s high enough to show that the labor market remains healthy and vigorous, but also low enough to show that jobs growth is slowing down without crashing precipitously. Neither too hot nor too cold, in other words.

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And to put a cherry on top, unemployment once again dipped (to 3.5 percent), returning to its February 2020 level at a low not seen before that since the 1980s. These days, that passes for glad tidings.

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All signs point to a slowing economy. Here’s how the Washington Post put things: " ... the jobs outlook is shifting, with workers seeing moderated wage growth and employers slowing down hiring in anticipation of a slowdown in sales."

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The post goes on to cite sources who assert that current " ... hiring [is] for replacement rather than growth and expansion ... focusing on essential roles." NPR points to a 10 percent decline in job vacancies in August, even as "the pace of hiring held fairly steady."

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This is what we refer to as being in the "Goldilocks zone," where the porridge (i.e. whatever is being tracked or measured) is neither too hot nor too cold. And it speaks to the curious notion that jobs growth decline is good news.

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What Do The Numbers Actually Say?

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Longer term trends also show declining job growth rates. The latest summary cites monthly job growth for 2022 so far of 420,000 versus 562,000 in 2021: more evidence of the kind of "kinder and gentler" decline that the Fed is hoping for. Where, then, was the action for September, 2022? Here are the high points:

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Leisure and hospitality gained 83,000 jobs for September. It’s been pretty steady at about this level all year long. That said, this sector is still down by 1.1 million jobs (6.7 percent) as compared to February 2020’s pre-pandemic high water mark.

Healthcare grew by 60,000, and is now back at parity with the February 2020 benchmark. Within this category, 28,000 jobs went to each of ambulatory health care and hospitals (for over 90% of the total).

Professional and business services jobs waxed by 46,000, about 26,000 under the monthly average year-to-date. Temporary help services accounted for 27,000 of that number, with 9,000 going to investigative and security services, and 5,000 to scientific R&D services. On the other hand, business support services lost 12,000 jobs, while legal services and advertising each lost 5,000 jobs. Overall, this sector remains above pre-pandemic levels.

Manufacturing added 22,000 jobs for September, with another mix of gains and losses. Winners included motor vehicles and parts (+8,000), fabricated metal products (+6,000) and electrical equipment and supplies (+3,000). Printing and related support led the losers (-4,000). Overall this sector has averaged monthly growth of 36,000 jobs for 2022 (another sign of trending downward).

Construction grew by 19,000, with 18,000 coming from specialty trade contractors.

Wholesale trade gained 11,000 jobs, 7,000 behind its year-to-date monthly average.

Financial services lost 8,000 jobs for the month, with a mix of gainers and losers. Depository credit intermediation added 5,000 jobs, as insurance carriers, etc. lost 9,000 and nondepository credit intermediation lost 7,000 jobs.

Transportation and warehousing lost 8,000 jobs for September, but a dip of 11,000 in truck transportation was partly offset by a bump in air transportation of 3,000. Overall, this sector remains up vis-à-vis February 2020.

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Other sectors were mostly flat. These include mining, retail trade, our home sector of information, other services, and government.

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Wages Grow, But Do Not Match Inflation

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Average hourly earnings now stand at $32.46 for private nonfarm payrolls. That’s up 0.3 percent for September, and 5 percent for the past 12 months. This represents some improvement, but not enough to offset recently reported inflation rates at or over 8 percent.

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Logic and prior history both suggest that wages must continue to rise, even as job growth continues its downward trend.

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What’s Next for the Workforce, and the Economy?

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Gosh, there’s lots of interesting stuff going on. Ukraine is pushing into the recently-annexed areas along its eastern and southern borders. Putin is rattling a nuclear saber. OPEC has decided to curb production, just as fuel prices dipped to less scary levels (except in California, where they remain in the $6-to-$7-per gallon range).

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And now, the job market is hinting at a possible soft landing, as the swirls of chaos and chance continue. Things look moderately encouraging at the same time that they suggest more dire possibilities. Stay tuned, and I’ll keep you posted as things progress.