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Home > Economics > September jobs report: Mixed hiring data with stagnant wages

September jobs report: Mixed hiring data with stagnant wages

Oct. 4, 2019 by Joseph Brusuelas

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The U.S. economy is slowing and job creation continues to ease along with overall economic activity. Given the recent readings of the manufacturing sector, which is in recession, and a service sector that has slowed noticeably, forward-looking investors, firm managers and policymakers should anticipate a march down toward 100,000 jobs per month by the end of the year, which is necessary to stabilize the unemployment rate.

Weak private sector hiring is likely connected to the decline in outlays on capital expenditures caused by uncertainty over policy. The economists at the Federal Reserve will likely interpret the evolution of the economic data as such; the Fed is expected to act to reduce the policy rate by 25 basis points in October and likely do so again at its December meeting as the drag on the economy caused by the trade war extracts a greater price on overall economic activity.

Average hourly earnings declined by -0.04% and are up 2.89% on the month. Hours worked did not increase and held steady at 34.4 in September. In our estimation, wage growth peaked in late 2018 and the stagnation in hours worked is directly attributable to uncertainty in the direction of trade policy. With hiring continuing to slow and hours worked likely shrinking, the next data to focus on is the pace of firings, as tracked by weekly initial jobless claims and the jobs opening, layoffs and turnover rate. Such is the state of the labor market during a trade war.

The GM strike started on Sept. 16 and the BLS reference week for the month of September ended on Sept. 14, so the work stoppage did not influence the monthly labor count. If the strike continues through the October reference week (Oct. 12), forward looking investors and policymakers will not observe the impact of the strike until the October employment report released on the first Friday in November. There will likely be further declines in manufacturing hiring in October and weak or negative numbers in goods production.

A slower pace of hiring defined September, as the total change in employment increased by 136,000 jobs on the month and the unemployment rate declined to 3.5%. While an additional 117,000 individuals entered the labor force, 545,000 exited—a jump in the unemployment rate next month is anticipated.

The composition of job creation on the month was decisively tilted toward lower wage jobs with goods producing hiring adding only 5,000, construction adding 7,000 and manufacturing losing 2,000. Private service providing jobs increased by 109,000, with business services adding 34,000, education and health adding 40,000, and government hiring increasing by 22,000. The retail trade saw 11,000 job losses.

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About Joseph Brusuelas

@JoeBrusuelas

Joe Brusuelas, “chief economist to the middle market,” is the preeminent voice championing issues and policies facing midsize companies in the United States and around the world. An award-winning economist, Brusuelas has more than 20 years’ experience analyzing U.S. monetary policy, labor markets, fiscal policy, international finance, economic indicators and the condition of the U.S. consumer.

A member of the Wall Street Journal’s forecasting panel, Brusuelas regularly briefs members of Congress and other senior officials regarding the impacts of federal policy on the middle market and the factors by which middle market executives make business decisions. He also frequently offers his insights on the U.S., Canadian and global economies in the financial media. In 2020, he was named one of the 100 most influential economists by Richtopia.

Before joining RSM in 2014, Brusuelas spent four years as a senior economist at Bloomberg L.P. and the Bloomberg Briefs newsletter group, where he co-founded the award-winning Bloomberg Economic Brief. Earlier in his career, he was a director at Moody's Analytics covering the U.S. and global economies for the Dismal Scientist website. He also served as chief economist at Merk Investments L.L.C. and chief U.S. economist at IDEAglobal.

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