Closely watched economic data released earlier this week indicate that Friday’s jobs report could come in hot or perhaps frigidly cold.
On Tuesday, the latest tally on job openings unexpectedly bolted higher, jolting markets in the process. A day later, ADP’s national employment report showed that private-sector employers scaled back their hiring efforts far more than expected.
Come Friday at 8:30am ET, economists are forecasting that employers added 170,000 jobs last month, according to Refinitiv data. While that is a definite step back from the estimated 187,000 jobs added in August, it’s only slightly below pre-pandemic levels. From 2010 to 2019, the US added 183,000 jobs per month on average.
Economists also estimate that the unemployment rate will inch back down to 3.7% from 3.8%.
“The labor market still is solid,” Nela Richardson, chief economist with payroll processor ADP, told CNN in an interview. “It’s slowing, but there is no indication that it’s breaking.”
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Reading beyond the headlines
For much of the past 18 months, the unemployment rate has drifted between 3.4% and 3.7%, a historically low range that stood in defiance to the barrage of Federal Reserve interest rate hikes and expectations for increased joblessness.
In August, the unemployment rate unexpectedly jumped 0.3 percentage points to 3.8%. And while monthly data and the unemployment rate itself can be quite volatile, a driver behind the increase was a welcome one: an increase in labor force participation.
Aside from August, when it unexpectedly jumped 0.3 percentage points to 3.8%, the nation’s jobless rate has landed between 3.4% and 3.7% since March 2022.
“How much of that was noise?” said Nick Bunker, head of economic research for the Indeed Hiring Lab, adding that if monthly job gains remain north of 100,000, “how many more [people] can that pull into the labor force?”
Labor force participation plummeted during the early stages of the pandemic; when the economy started reopening, consumer demand and businesses’ needs far outstripped available workers. Some of the labor force declines were due to increased early retirements, deaths and long-Covid health issues in addition to low immigration, lack of access to childcare, and increased caregiving responsibilities.
Additionally, as the pandemic laid bare workplace concerns such as low pay and safe working conditions, as well as highlighted the fleeting nature of life, the “Great Reshuffling” took hold as Americans switched jobs or careers to achieve better work-life balance.
During the past year, more people have returned to the labor force.
The overall labor force participation rate rose to 62.8% in August, BLS data shows. That’s the highest it’s been since the onset of the pandemic.
How much higher it can climb is unknown: Even before Covid was in play, labor force participation was trending downward, largely due to the massive Baby Boomer generation aging out of the workforce.
“Is there an immaculate rebalancing, and can job openings drop and can labor force participation rise at the same time?” Bunker asked, noting that the latter likely “doesn’t have enough power to fight back against the extremely powerful force of demographics.”
Additionally, Bunker said he’s keeping a close eye on wage growth trends that have been showing a deceleration.
“Things are no longer ‘frothy’ as they were in 2021 and 2022,” he said. “We’re in a moderation, not a deterioration.”
To that end, economists also will be looking closely at the revisions made.
Federal data is fluid and frequently subject to change as more detailed and accurate information becomes readily available. The Labor Department’s monthly jobs report is based upon survey responses from employers across a wide swath of industries. Those initial estimates are then revised twice more.
For eight consecutive months, however, the gains have been revised downward.
“Many are interpreting this streak of downward revisions as a sign that we could be at an inflection point and that the labor market could be weakening even more rapidly than the official data suggests,” said Julia Pollak, senior economist with ZipRecruiter.
Not the whole picture
While Friday’s report will deliver a host of critical info about the nation’s job market, one of the biggest stories in labor might not be fully on display.
There are more than 25,000 United Auto Workers union members on strike at Detroit’s Big Three automakers of Ford, General Motors and Stellantis, and more than 3,300 members have been laid off or furloughed to date.
While some of the impacts are starting to be seen at local workforce centers and in state unemployment claims, the effects of the UAW strike will be largely muted in Friday’s jobs report, economists say.
The UAW strike started on September 15, which is at the tail end of the reference periods for both of the surveys that make up the monthly employment report. The reference periods for the household and establishment surveys are generally the calendar week that includes the 12th day of the month and the pay period that includes the 12th day of the month, respectively.
Workers who worked or received pay for that pay period, even if it’s just for 30 minutes, are counted as employed by the Bureau of Labor Statistics.
“We won’t see the direct impact probably until the October [jobs] report,” Bunker told CNN.
Separately, the SAG-AFTRA strike involving 16,000 actors should not have a noticeable impact on the information sector, as striking employees were already counted as unemployed in the August jobs report, noted Lydia Boussour, EY’s senior economist.
“Overall, there were only 1,700 net new workers on strike in September, according to the latest BLS strike report,” she said.
Still, the UAW strike could have ripple effects on employment outside of the Big Three as other companies within, or ancillary to, the auto industry could lay off workers as a result of slowing or canceled orders.
However, while relatively undetectable in the upcoming jobs report, the effects of the strikes are already showing up in key government data. The jobless claims report issued last week showed a spike in unemployment in Michigan for the week ended September 23.
That’s expected to grow when last week’s data is released on Thursday morning. University of Michigan economist Don Grimes estimated that Michigan could lose up to 18,495 jobs by the end of the week and that UAW-related job loss nationwide could grow to 65,640 people, he told the Detroit Free Press.
Latest data on job losses
The effects of the UAW strike did appear to show up in Challenger, Gray & Christmas’ monthly job cuts report, which was released Thursday morning.
In September, US-based employers announced 47,457 job cuts, of which 3,200, or nearly 7%, were attributed to “labor dispute” as a cause.
The total announced layoffs last month were 37% below those announced in August and are up 58% from September 2022, according to the Challenger report. Last year and 2021 were historically low years for layoffs as the US labor market surged to backfill the more than 21 million jobs lost at the outset of the pandemic.
Despite the pullback, the job cut announcements made so far this year are nearly triple that of the same period last year and are the highest they have been for data through September going back to 2009, excluding 2020.
“Employers are grappling with inflation, rate increases, labor issues and consumer demand as we enter [the fourth quarter],” said Andrew Challenger, senior vice president of the outplacement firm, in a statement.
First-time claims for unemployment, a proxy for layoffs, have remained low in recent months and continued to do so last week.
The number of Americans filing for first-time jobless benefits held steady last week near yearly low levels, the Department of Labor reported Thursday.
Initial claims for unemployment insurance, considered a proxy for layoffs, were 207,000 for the week ended September 30. That’s down 2,000 claims from the previous week’s revised total of 205,000 claims. The weekly filings were roughly in line with economists’ estimates of 210,000 initial claims, according to Refinitiv estimates.
Weekly jobless claims, which are highly volatile and frequently revised, remain below historical and pre-pandemic averages, exemplifying the strength of the job market.
In the decade before the pandemic, weekly claims for unemployment benefits averaged 311,000; and in 2019, they averaged 217,500, Labor Department data shows.
Continuing claims, which are filed by people who have received unemployment benefits for more than one week, were 1.664 million for the week ended September 23. That’s down 1,000 claims from the prior week’s downwardly revised total of 1.655 million. Economists were expecting 1.675 million continuing claims, according to Refinitiv.
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