Strong Job Gains, Weaker Participation

By Ben Sirois, Economist, Dodge Data & Analytics

BEDFORD - November 3, 2017 - Nonfarm payrolls fell below consensus predictions last month, adding a seasonally adjusted 261,000 jobs in September, short of the 313,000 predicted in a Bloomberg poll of economists. While this gain is the largest in over a year, economists had predicted a stronger rebound in hiring following the negative reading last month due to hurricanes Harvey and Irma. Significant upward revisions for the previous two months suggest the effects from the weather events were less than initially feared. Job gains for August were revised upward by 39,000 and September payrolls were adjusted upward by 51,000, adding 90,000 jobs in revisions to the past two months. With these changes, the 2017 year-to-date average sits at 169,000. The strong gain in October has lifted the average back to its pre-hurricane level and suggests continued moderate job growth moving forward. Labor force participation fell 0.4% to 62.7%, holding essentially flat over the past 18 months. The unemployment rate fell to 4.1%, below the estimated 4.2% due to the decline in participation in the labor market.

The private sector added 252,000 jobs in October, led by a significant increase in leisure and hospitality (+106,000), almost completely erasing the September decline of 110,000. Other sectors that saw significant gains include professional and business services (+50,000), education and health services (+41,000) and manufacturing (+24,000). Total construction payrolls continue to post gains, adding 11,000 in October, led by specialty trade contractors (+10,400) and residential builders (+7,200). Nonresidential building and heavy/civil engineering payrolls saw modest declines of 3,300 and 3,000 respectively. The public sector added 9,000 jobs in October with state and local governments increasing by 2,000 each and federal employment increasing by 5,000.

Headline wage growth fell back to its subdued trend after an uptick in September, increasing 2.4% year on year in October. Wage growth is unlikely to break out of its low growth trend without increases in labor force participation, which remains near historic lows. While the participation rate remains low, the employment-population ratio has shown moderate but consistent improvement, increasing almost one full percentage point over the past two years, from 59.3% in October 2015 to 60.2% in October 2017.

In general, the data in the September and October jobs reports are muddled by the effects of natural disasters and November will be the first “clean” jobs report in as many months. The paltry employment numbers for September, as well as October’s rebound, are expected to be one-time events and payroll growth will continue at a steady and moderate rate as the economic expansion continues to march on.

 

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