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Another Slow Month for Job Gains

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Payroll employment is expected to rise by 125,000 in September, which will mark a slight slowdown from the already weak pace of August. Private sector job gains are expected to come in at 115,000 after dipping below the 100,000 mark in August. Census hires were strong last month as many of the census offices were slated to be opened by August. Recruiting for the 2020 census continues, but actual hiring is not expected to pick up again until January. That is when the Census website says that job offers to recruits will be made.

Gains in professional business services and health care are expected to offset weakness in manufacturing, construction and retail jobs. The manufacturing sector is suffering from weak growth abroad and a further escalation in tariffs. The strike by nearly 48,000 workers at GM is starting to take a toll on manufacturing activity, but it began the week after the survey for September payroll employment was taken. If the strike lasts into next week, those losses will show up in the October employment report instead of the September employment report.

Retail jobs continue to suffer from restructuring and the shift in consumer preferences for online over in-store shopping. Consumers pulled back on travel and discretionary purchases as the trade war ramped up in August. Transportation hiring contracted last month, despite a sharp acceleration in wages, which suggests that the market for drivers remains tight. The last mile of the delivery has become the hardest to fulfill, given the promises of same-day or next-day delivery. Hiring in the leisure and hospitality sector is expected to remain solid if not spectacular. Consumers pulled back on discretionary spending as the trade worsened in August.

Average hourly earnings are expected to rise 0.2% to $27.18 per hour in September. That would keep year-over-year gains in average hourly earnings at the 3.2% pace we saw in August. Wages are going up fastest in the transportation and information sectors. This is even as long-haul trucking has slowed in response to weakness in the manufacturing sector; same-day and overnight shipping have clearly strained the system. The tightest labor market conditions appear to be in finding drivers to deliver packages to final destinations.

Separately, the unemployment rate is expected to edge down a tick to 3.6% but for the wrong reason. Participation in the labor force is expected to edge down slightly in September after gaining ground in recent months. Concerns that tariffs are affecting hiring decisions have shown up in surveys of consumer attitudes during the month; sentiment remains suppressed relative to one year ago.

The labor force participation rate for prime-age men (25-54 year olds) remains particularly weak. Millennial women have driven recent increases in the participation rate, which hit a trough in late 2015. The only exception among women in the labor force is Hispanic women with less than a high-school degree, whose participation rate rose dramatically between 2015 and 2018. Many have dropped out of the labor force during the last year. It appears that family responsibilities are weighing more heavily on this group, which marks a shift from that 2015-2018 time frame. It may just be that younger Hispanic women, with less than a high school degree, have moved into their childbearing years.

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