Economy Shed 33,000 Jobs in September But Unemployment Rate Falls to 16-Year Low

 

By Mark Lieberman

Managing Director and Senior Economist

Highlights

  • Unemployment rate FELL in September to 4.2 percent, lowest since February 2001;
  • Number of jobs FELL 33,000 in September, first decline in jobs since September 2010;
  • Average weekly earnings ROSE $4.13, a 2.8 percent year-year GAIN, down from the 3.0 percent year-year gain in August;
  • Average workweek REMAINED at 34.4 hours;
  • Prior month job totals REVISED DOWN a net 38,000: UP 13,000 in August but Down 51,000 in July
  • Private sector payrolls FELL 40,000 in September; Government payrolls ROSE 7,000;
  • Unemployment in September FELL to 6,801,000 – lowest in more than 10 years (May 2007: 6,766,000);
  • Number of food service jobs DROPPED 104,700, due to Hurricane Irma, largest month-month decline ever
  • Number of construction jobs INCREASED 8,000, after increasing 19,000 in August; Residential construction jobs declined.

Image result for employment situation

This is one of those monthly Employment Situation releases you don’t want to see. The only thing missing from the report were the asterisks denoting the special circumstance as the Bureau of Labor Statistics reported Friday the economy lost 33,000 jobs in September but the unemployment rate dropped to 4.2 percent.

That said, the storm related damage to the labor sector as delineated in the month Employment Situation  report masked deeper concerns about the economy. Historically, major storms or disasters shrink payrolls by about 50,000 in the month after they occur. Adding back those 50,000 jobs would have meant a paltry gain of 17,000 jobs, far below the average gain of 164,000 since the Trump Administration began.

It wasn’t so much that the storms hit, but was where they hit. Though state-by-state numbers aren’t yet available, Florida would appear to have been the greatest contributor to the job loss as the leisure and hospitality sector shed 111,000 of its 15.9 million jobs. The number of restaurant jobs alone fell 104,700, about 0.9 percent of the total of those jobs.

The drop in the number of low-paying food service jobs drove average weekly earnings up $4.13, a gain of 0.5 percent, the largest since June as low paying jobs disappeared. Leisure and hospitality jobs are among the lowest paying occupation with average weekly earnings of $404.30 less than half the average of $913.32 for all jobs.

The anomaly in the Employment Situation Report of course is that while the total number of payroll jobs contracted, so did the unemployment rate, as the number of persons unemployed fell to the lowest level in more than 10 years.

Other sectors were not immune to the weaker job count. The construction sector, for example, added 8,000 jobs in September after growing by 19,000 jobs in August. The number of residential construction jobs fell 4,000 in September reflecting the weakening housing sector. While construction jobs in storm-ravaged states should increase as rebuilding efforts kick in, the increase could be geographical shift.

The number of retail jobs also declined in September, dropping for the eighth straight month with no relief in sight as major retailers have announced plans to scale back hiring for the holiday season.

Despite the impact of Hurricane Harvey in Louisiana and Texas – two states heavily dependent on oil drilling – the number of oil and gas extraction jobs rose to 181,700 – the highest level since April, 2016.

There were some comparative bright spots in the otherwise disappointing report but the headline numbers masked weakness. The number of heal service and education jobs, for example, grew 27,000 in September, but the three-month average in that sector was 41,000. The growth was evenly split between education and health jobs but the increase in health jobs was far below the three-month average for that sector.

Hear Mark Lieberman every Friday morning at 6:20 am on The Morning Briefing on POTUS on Sirius-XM 124. You can follow Mark Lieberman on Twitter at @foxeconomics.

 

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