A subdued September

September 27, 2024

Payroll employment is expected to rise by 120,000 in September, slightly behind the 142,000 we saw in August. Public sector hiring is expected to add only 10,000 jobs, after being a major driver of employment gains since June 2023. Many state and local governments fell short of their revenue expectations in fiscal 2024 and face headwinds on spending now that we are in a new fiscal year. Pre-pandemic, we added about 1.2 million jobs in state and local education in September; we need to exceed that threshold to see gains above seasonal norms. 

Healthcare and social assistance are expected to continue to add jobs but at a slower pace than we have seen in recent months. Job openings in the space plummeted at the end of July but remain above pre-pandemic norms. Labor shortages in child and elder care remain acute, despite a drop in quit rates. Employment at nursing and assisted care facilities is below its pre-pandemic peak, exacerbating the care crisis affecting families.

The leisure and hospitality category tends to shed jobs following the Labor Day holiday but has lost substantial momentum in recent months. Many hotel workers went on strike during the Labor Day holiday due to burnout and staffing shortages. Those problems and persistently strong air travel are expected to result in only slightly fewer end-of-summer layoffs this year.

A bright spot is transportation and warehousing, which has begun to emerge from a recession. A pick-up in online spending and stockpiling ahead of threatened port strikes on the East Coast is contributing to those gains. Discounts online accelerated over the summer, while blistering heat waves made ordering online easier than going out in much of the South and West. 

Manufacturing employment is expected to be weak, although orders for big ticket durable goods are moving up again. The strike at Boeing will not show up until October, unless a contract can be agreed upon before mid-month. More than 30,000 machinists are currently on strike.

Construction employment is expected to pick up a bit. Commercial construction activity is buoyed by chip plant subsidies and a surge in demand for data warehouses. Home building is regaining momentum in response to the recent drop in mortgage rates.

Average hourly earnings are expected to rise 0.2% in September, after jumping 0.4% in August. That translates to a 3.7% gain from a year ago. Wages continue to outpace inflation but are on track to continue cooling. Advertised wages have fallen back to pre-pandemic levels.

The unemployment rate is expected to hold at 4.2%, but risks edging higher. We are getting into rounding errors on the second decimal point for this indicator. Quit rates have fallen; it takes longer to find a new job and to replace a lost job.

The U6 measure of unemployment, which better captures stress in the labor market, is expected to hit 8% in September. That is up from a low of 6.5% in December 2022. The U6 includes discouraged workers and those who are forced to accept part-time instead of full-time employment for economic reasons.

The ranks of those working voluntary part-time have also swelled, but the term voluntary is relative. That category includes workers who are forced to cut back on their hours due to childcare problems, which is less about choice than necessity and undermines the hours more than a million people can work each month.

The election could exacerbate the weakness. Close elections stoke uncertainty about the policy landscape post-election and could cause hesitation in hiring this fall.