Last Friday (October 7, 2022), the U.S. Bureau of Labor Statistics (BLS) released their latest labor market data – Employment Situation Summary – September 2022 – Reported total employment rose by just 263,000 jobs (a further slowdown) and the official unemployment rate fell (0.2 percentage points) to 3.5%. Total employment in the Labour Force Survey increased only by a net 204,000 (0.13%), while the labor force declined by a net 57,000 (0.03%) as the participation rate fell 0.1 percentage point to 62.3%. 4. As a result (in accounting terms), the total measured unemployment fell by 261,000 to 5,753,000, which is why the unemployment rate fell by 0.2 percentage points. However, while the unemployment rate has fallen, weak job growth and falling participation are signs of a faltering labor market. There is also no base-wage pressure to push inflation further up. Wage growth appears to be a response to inflation rather than driving it. Given the data, the claim that wage pressures are driving inflation is untenable.
September 2022 overview (seasonally adjusted):
- Employment rose by 263,000.
- Total employment in the Labour Force Survey was only a net gain of 204 (-0.13%).
- The labor force fell by a net 57,000 (0.03%).
- The employment-to-population ratio was unchanged at 60.1% (still down from the May 2020 peak of 61.2).
- The estimated total number of unemployed fell by 261,000 to 5.753 million.
- The official unemployment rate fell 0.2 percentage points to 3.5%.
- The participation rate fell 1 percentage point to 62.34%.
- The broad measure of labor underutilization (U6) fell 0.3 percentage points to 6.7 percent.
For those confused about the difference between wage (institution) data and household survey data, you should read this blog post – The U.S. labor market is in a sad state – I explained the differences in detail.
Some months have small differences, while others have large differences.
This month makes a big difference.
Salary Employment Trends
BLS states:
Total nonfarm payrolls increased by 263,000 in September. Monthly employment growth has averaged 420,000 in 2022 so far, compared to 562,000 per month in 2021. September saw notable job growth in leisure, hospitality and healthcare…
The leisure and hospitality sector added 83,000 jobs in September, in line with the average monthly employment gain for the first eight months of the year… 1.1 million, or 6.7%, below the February 2020 pre-pandemic level.
Employment in the healthcare sector increased by 60,000 in September and has recovered to February 2020 levels…
Employment in professional and business services continued to trend upward in September (+46,000). Employment in the industry is growing by an average of 72,000 monthly jobs through 2022…
Manufacturing employment continued its upward trend in September (+22,000)…an average of 36,000 new jobs per month so far in 2022.
Construction employment continued its upward trend in September (+19,000), in line with the monthly average increase in employment for the first eight months of the year.
Wholesale trade employment continued its upward trend in September (+11,000). Wholesale trade adds an average of 18,000 jobs per month through 2022…
Employment in other major industries was little changed this month
The first graph shows the monthly change in wage employment (in thousands, expressed as a 3-month moving average to remove monthly noise). The red line is the annual average. I ignore observations between January 2020 and September 2020, which are so extreme that it is difficult to compare the current period with pre-pandemic history.
The U.S. labor market has now surpassed pre-pandemic levels 514 thousand Employment, although the gains don’t even cut across sectors as detailed above.
The graph below shows the same data in a different way – in this case, the graph shows the average monthly net change in wage employment (real) for the calendar years 2005 to 2021.
The red markers on the columns are the results for the current month.
The final average for 2019 was 164,000.
The final average for 2020 was -774,000.
The final average for 2021 is 562,000.
The average for 2022 so far is 420,000, and it’s falling fast.
Labour Force Survey data – employment growth positive but subdued
Seasonally adjusted data for September 2022 shows:
1. The total employment in the Labour Force Survey was only a net increase of 2.042 million (-0.13%).
2. The labor force decreased by 57,000 (0.03%).
3. The participation rate fell by 0.1 percentage points to 62.3%.
4. As a result (in accounting terms), the total measured unemployed decreased by 261,000 to 5,753,000, and the official unemployment rate decreased by 0.2 percentage points to 3.5%.
While the unemployment rate fell, weak job growth and falling participation were signs of a faltering labor market.
The graph below shows monthly employment growth since January 2008 and excludes extreme observations (outliers) between May 2020 and October 2020 that distort current relative to the pre-pandemic period period.
The employment-to-population ratio is a good measure of labor market strength, as the denominator population is not particularly sensitive to cycles (unlike the labor force), so movements are relatively well-defined.
The graph below shows U.S. employment from January 1950 to September 2022.
Although the ratio fluctuated slightly, it fell 8.6 percentage points to 51.3% in May 2020, the largest monthly decline since sampling began in January 1948.
In September 2022, the ratio remained unchanged at 60.1%.
The pre-pandemic peak level in May 2020 was 61.1%.
Unemployment and underutilization trends
BLS states:
The unemployment rate edged down to 3.5% in September, returning to July’s level. Unemployment numbers edged down to 5.8 million in September…
The number of long-term unemployed (unemployed for 27 weeks or more) was little changed at 1.1 million in September. Long-term unemployed account for 18.5% of all unemployed…
The number of people working part-time for economic reasons fell by 306,000 to 3.8 million in September. These people who would have liked to work full-time are working part-time because their hours are reduced or they cannot find full-time employment…
The reasons for the drop in the unemployment rate in September were:
1. Employment growth is positive (but modest).
2. The participation rate fell slightly and the labor force contracted slightly.
The first graph shows the official unemployment rate since January 1994.
The official unemployment rate is narrow A measure of labor waste, which means that strict comparisons with the 1960s, for example, in terms of labor market tightness, must take into account broader measures of labor underutilization.
The figure below shows the BLS measurement U6, which is defined as:
Total unemployment, plus total employment of all marginalized workers plus part-time employment for economic reasons, as a percentage of all civilian labor force plus all marginalized workers.
As such, it is the broadest quantitative indicator of labor underutilization published by the Bureau of Labor Statistics.
Before COVID, U6 was 6.8% (Dec 2019).
In September 2022, the U6 indicator was 6.7%, down 0.3 percentage points – essentially reversing the upward trend in August.
The decline was due to a drop in the unemployment rate and a decline in workers forced to work part-time for economic reasons — an indicator of underemployment in the United States.
What is the salary in the US?
With inflation currently rising sharply and the Fed pretending to have a major wage problem that needs to be disciplined as massive unemployment rises, one would expect to see strong nominal wage growth pushing up the price level.
The BLS report said:
Average hourly earnings for all private nonfarm payrolls rose 10 cents, or 0.3%, to $32.46 in September. Average hourly earnings rose 5.0% over the past 12 months. Average hourly earnings for private-sector production and non-supervisory employees rose 10 cents, or 0.4%, to $27.77 an hour in September.
However, the latest – BLS Actual Earnings Summary (Published September 13, 2022) – Tell us:
From August 2021 to August 2022, real average hourly earnings decreased by 2.8% on a seasonally adjusted basis.
The chart below shows the change in real average hourly earnings through September 2022 (index of 100 in December 2019).
CPI started to decline in August, and we believe the downward trend will continue. Average hourly earnings rose 0.31% in September, slower than the much higher inflation gains in June and July.
Overall, it’s hard to say that the inflation event is a “wage story.”
Another indicator that tells us whether the labor market is favoring workers is the turnover rate.
The latest data from the BLS shows that between August 2021 and August 2022 last year, the turnover rate was relatively stable, falling slightly from 2.8% of total employment to 2.7%.
in conclusion
In September 2022, the U.S. labor market showed signs of further slowing, with payrolls increasing by just 263,000 net jobs, and labor force growth turning negative as the participation rate dipped slightly.
The official unemployment rate and unemployment rate fell as a result.
There is also no base-wage pressure to push inflation further up. Wage growth appears to be a response to inflation rather than driving it.
Enough for today!
(c) Copyright 2022 William Mitchell. all rights reserved.
