What to expect from Friday’s jobs report

Minneapolis
CNN
—

At this time last week, the outlook seemed to grow dimmer that the September jobs report would be released this Friday as planned.

A government shutdown would shut down the Bureau of Labor Statistics and shut down important economic data.

But after a last-minute deal in Washington, key labor market data is now coming in as it should.

Whether it ultimately lives up to expectations is another question: closely watched economic data released earlier this week suggest Friday’s jobs report could be hot or possibly cold.

On Tuesday, the latest job data rose unexpectedly, which rattled the markets. A day later, ADP’s national jobs report showed that private sector employers cut their hiring efforts by a much larger margin than expected.

At 8:30 a.m. ET on Friday, economists forecast that employers added 170,000 jobs last month, according to data from Refinitiv. So far it is clear retreat from the estimated 187,000 jobs added in August, only slightly below pre-pandemic levels. From 2010 to 2019, the US added an average of 183,000 jobs per month.

Economists also expect the unemployment rate to drop to 3.7% from 3.8%.

“The labor market is still strong,” Nela Richardson, chief economist at ADP, told CNN. “It’s slowing down, but there’s no sign of it breaking.”

For most of the past 18 months, the unemployment rate has hovered between 3.4% and 3.7%, a historically low range that has defied a flurry of Federal Reserve interest rate hikes and expectations for rising unemployment.

In August, the unemployment rate unexpectedly jumped by 0.3 percentage points to 3.8%. And while monthly data and the unemployment rate itself can be quite volatile, the reason for this increase was a pleasant one: increased labor force participation.

“How much of that was noise?” said Nick Bunker, head of economic research at Indeed Hiring Lab, adding that if monthly job gains stay north of 100,000, “how many more (people) can that bring into the workforce?”

Labor force participation fell sharply in the early stages of the pandemic; as the economy began to recover, consumer demand and business needs far outstripped the available workforce. Part of the workforce decline has been attributed to increased early retirements, deaths and health problems related to the long duration of COVID, in addition to low levels of immigration, lack of access to childcare and increased caregiving responsibilities.

In addition, as the pandemic has exposed workplace issues such as low pay and unsafe working conditions, and highlighted the fleeting nature of life, the “Great Reshuffle” has begun as Americans change jobs or careers to achieve a better work-life balance. and personal life.

Over the past year, more people have returned to work.

The overall labor force participation rate rose to 62.8% in August, BLS data showed. This is the highest rate since the beginning of the pandemic.

How much higher it might climb is uncertain: Even before Covid came into play, labor force participation was falling, largely as the massive baby boomer generation ages out of the workforce.

“Is there a perfect rebalancing, and can job vacancies go down and labor force participation go up at the same time?” Bunker asked, noting that the latter probably “doesn’t have enough strength to fight off an extremely powerful demographic force.”

In addition, Bunker said he’s keeping a close eye on wage growth trends that are showing signs of slowing.

“Things are no longer as frothy as they were in 2021 and 2022,” he said. “We’re in a moderate state, not a worsening state.”

To that end, economists will also be scrutinizing the changes made.

Federal data is volatile and changes frequently as more detailed and accurate information becomes available. The Labor Department’s monthly jobs report is based on responses from employers in various industries. These initial estimates are then revised twice more.

However, for eight months in a row, the results have been revised downwards.

“Many are interpreting this streak of downward revisions as a sign that we may be at an inflection point and that the labor market may be weakening even faster than the official data suggest,” said Julia Pollak, senior economist at ZipRecruiter.

While Friday’s report will provide plenty of important information about the nation’s labor market, one of the biggest labor stories may not be fully exposed.

More than 25,000 members of the Auto Workers union are on strike at Detroit’s Big Three automakers Ford, General Motors and Stellantis, and more than 3,300 members have been laid off or laid off so far.

While some effects are beginning to show in local labor centers and state jobless claims, the effects of the UAW strike will be largely muted in Friday’s jobs report, economists said.

The UAW strike began on September 15, which is at the end of the reporting periods for both surveys that make up the monthly employment report. The base periods for household and business 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 were paid during that pay period, even if it’s only 30 minutes, are counted by the Bureau of Labor Statistics as employed.

“We won’t see the direct impact until maybe the October (jobs) report,” Bunker told CNN.

Separately, the SAG-AFTRA strike involving 16,000 people actors shouldn’t have a noticeable impact on the information sector, as striking employees were already counted as unemployed in August’s jobs report, said Lidia Bousur, senior economist at EY.

“Overall, according to the latest BLS strike report, only 1,700 new workers went on strike in September,” she said.

However, a UAW strike could have ripple effects for employment outside the Big Three, as other companies in or around the auto industry could lay off workers as a result of slowing or canceled orders.

However, while the effects of the strikes are relatively invisible in the upcoming jobs report, they are already showing up in key government data. The unemployment report released last week showed a spike in unemployment in Michigan for the week ending September 23.

That figure is expected to rise 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 losses nationwide could rise to 65,640, he told the Detroit Free Press.

The fallout from the UAW strike appeared to be evident in Challenger, Gray & Christmas’ monthly job cuts report, which was released Thursday morning.

In September, US employers announced 47,457 job cuts, of which 3,200, or nearly 7%, were attributed to “labor disputes” as the cause.

According to the Challenger report, the total number of layoffs announced last month was 37% below the number announced in August and up 58% from September 2022. Last year and 2021 were historically low years for layoffs as the U.S. labor market dramatically filled the more than 21 million jobs lost at the start of the pandemic.

Despite the pullback, job cuts announced so far this year are nearly triple the year-ago period and are the highest for September data dating back to 2009, excluding 2020 year.

“Employers are grappling with inflation, rate increases, labor challenges and consumer demand as we enter the fourth quarter,” Andrew Challenger, the firm’s senior vice president of outplacement, said in a statement.

Initial jobless claims, which are a proxy for layoffs, have remained low in recent months and continued to do so last week.

The number of Americans filing for unemployment benefits for the first time held steady last week near a one-year low, the Labor Department said Thursday.

Initial jobless claims, considered a proxy for layoffs, were 207,000 for the week ended Sept. 30. That’s down 2,000 from the previous week’s 205,000 claims. 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 subject to frequent revisions, remain below historical and pre-pandemic averages, a sign of labor market strength.

In the decade before the pandemic, weekly jobless claims averaged 311,000; and in 2019, they averaged 217,500, according to Labor Department data.

For the week ended Sept. 23, 1.664 million claims continue to be filed by people who received unemployment benefits for more than one week. That’s down 1,000 from the 1.655 million revised last week. Economists had expected 1.675 million claims, according to Refinitiv.