Employment Gains Slow Further

Payroll employment is expected to increase by 325,000 in October, less than half of the 661,000 initial estimates for September. The number of temporary census workers alone declined by nearly 130,000 during the month, which will decrease government employment. Many schools were forced to move back online after full or partial reopenings, which means we could see some additional layoffs in state and local education. Many state and local governments deferred layoffs in hope of another aid package from Washington, which has not happened.

We expect to see private sector payrolls rise by 430,000 in October, again less than half the pace of September. The seasonal adjustment of the data is starting to work against us in that this is typically a time of year when businesses ramp up. Any shortfall tends to be muted or could even show up as a negative in the data once it is seasonally adjusted. At the same time, layoff announcements in the airline, amusement park and movie theater industries picked up. Federal aid provided to the airline industry lapsed at the end of September, which triggered another round of mass layoffs.

Employment gains in professional services, health care, specialty contracting (residential construction), manufacturing and some hiring by retailers to fulfill orders online will help to temper weakness in the leisure and hospitality sector. The renewal of restrictions on indoor dining and bars occurred after the survey week for this employment report, which means it will not show up until next month. The data for November could turn negative, given the unmitigated spread in COVID-19 infections and the jump in hospitalizations.

Deaths, which lag the number of cases and hospitalizations, are also starting to increase and tend to be the primary reason that consumers pull back. Improvements in treatments cannot begin to compensate for the rise in the death toll tied to COVID if we don’t do more to mitigate the spread of the virus. The most recent surge had been traced to silent spreaders in the 12 to 30-year old age group.

Average hourly earnings are expected to rise 0.1%, supported by a rise in the hiring of higher wage workers. Hourly earnings are expected to rise 4.5% from a year ago. Again, the rise is more reflective of the composition of job gains - a loss of low-wage jobs - as opposed to an actual acceleration in wages.

The unemployment rate is expected to tick up to 8.1% from 7.9% as more workers attempted to look for work. Hispanic teens have contributed some of the largest gains in participation. Continued weakness in the participation of women in the labor market is expected to be offset by an uptick in the participation of men. Women have been forced to quit work more often than men to care for children now that education is mostly online from home.

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