Our forecast shows payroll employment rising by 160,000 in September, which is strong but marks a slowdown from the 201,000 increase we saw in August. Hurricane Florence, and the flooding that persists, caused reporting delays that likely shaved a bit from headline gains. The expected losses are likely to be regained in the data revisions included with October’s report.
We may see a shortfall in the household survey because some could not be reached during the survey week. Look for a sharp bounce-back in response rates for October.
We expect average hourly earnings to increase 0.3% between August and September, which would hold the pace at 2.9% year-over-year. Service sector companies paying lower wages, however, could bias average earnings to the upside for the month.
The number of hours worked could show a drop due to flooding, which closed some businesses temporarily but anything we lose this month should be regained next month. Moreover, employers are beginning to extend overtime hours to deal with order backlogs and a shortage of workers in some sectors. Many of our clients are now complaining that the pool of what they consider “eligible workers,” or people who can pass drug tests, is dramatically constrained and inhibiting their ability to staff up.
Separately, the unemployment rate is expected to hold at 3.8% as employers across the board are reporting they have lowered standards to tap into a larger pool of workers. Nonparticipants are rejoining the labor force but the number of those who have been unemployed for an extended period remains elevated.
The labor market continued to show signs of improvement in September despite temporary disruptions from Florence. It looks like we have finally hit a tipping point on wages, which is a welcome shift given the risks that rising oil prices will erode purchasing power during this holiday season.
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