September Jobs Report: Summer Sticks Around for September

The latest jobs numbers are out from the U.S. Bureau of Labor Statistics. What do they mean for job seekers, employers and investors? Here’s a quick take from Glassdoor Lead Economist Daniel Zhao.

The summer weather is sticking around in the labor market as the September jobs report shows hot job gains. Payroll employment grew by 336,000 in September and the unemployment rate held flat at 3.8 percent. Resilient jobs growth keeps some cushion for the Federal Reserve as it targets continued cooling in inflation without job losses.

Payroll Employment Growth Stays Warm

Employers added 336,000 jobs to payrolls in September, up from 227,000 in August (revised up from 187,000). The upward revisions to recent months helps create some margin for error to avoid job losses.

Payroll gains were strongest in health care & social assistance (+65,900 jobs added), leisure & hospitality (+96,000), and government (+73,000). 

The pattern of payroll gains have shifted recently with health care and government helping to sustain jobs growth as other industries have come and gone.

Unemployment Rate Flat

The unemployment rate was unchanged in September, holding at 3.8 percent. While the unemployment rate is up from its recent low in April of 3.4 percent, it still remains low by historical standards. Additionally, the labor force continues to hold onto its gain, sustaining ongoing job growth, as the prime-age labor force participation rate held at 83.5 percent, tied for its highest rate since 2002.

Female prime-age labor force participation dipped to 77.4 percent from 77.6 percent. As federal childcare funding diminishes, labor force participation for parents, and particularly mothers, should be watched closely in coming months as a drag on an otherwise strong year for labor force participation.

The unemployment rate for Black workers rose to 5.7 percent from 5.3 percent. The rise in Black unemployment is difficult to use as a recession indicator, but it is independently important to monitor as it remains above its low of 4.7 percent from April 2023.

Wage Growth Ticks Down

Wage growth fell to 4.2 percent in September, compared to 4.3 percent in August. The JOLTS report from earlier this week show that the quits and hires rates are now near or below pre-pandemic level, suggesting that we should expect less turnover to continue to tamp down wage growth in coming months.

Conclusion

As the labor market is in a resilient holding pattern, we’re one month closer to exiting 2023 without a recession. If wage growth decelerates smoothly into its pre-pandemic range, that will be the last remaining indicator to get the labor market in position for a soft landing. There are still risks looming on the horizon like a postponed government shutdown deadline and the UAW strike, but for now, the labor market remains resilient ahead of those risks.

More Insights

Payroll growth of 336,000 and upward revisions to recent months gives more cushion for the Fed to continue cooling the labor market without triggering job losses. However, keep in mind we may be seeing a temporary boost as some negative effects like the Yellow bankruptcy roll off. Jobs growth is unlikely to keep beating 300,000 in coming months, but even jobs growth in the 200,000s would be considered very healthy.

Jobs growth was broad-based in September with almost all major sectors adding jobs, except for Information (includes tech and Hollywood) which continues to be weak. Government did drive a significant share of job gains, which should be taken with a grain of salt as government job gains can be noisy around the start of the school year.

The pattern of jobs growth has clearly shifted over the last few years:

Wage growth has cooled significantly. On an annualized month-over-month basis, wage growth was just 2.9% in August & 2.5% in September. A few more months at that rate would pull wage growth down to ~3.5%, consistent with the level we saw in early 2019 and achieving the Fed's soft landing goals for the labor market.

Average weekly hours held steady at 34.4 hours, consistent with pre-pandemic levels and now largely unchanged over the last 6 months.

For the household survey, the unemployment rate held flat at 3.8 percent, which is still low by historical standards, but a little bit up off its low of 3.4 percent from April.

Prime-age labor force participation and employment-population ratio remain near multi-decade highs though there wasn't additional growth from these measures in September.

The Black unemployment rate rose to 5.7 percent, up from its low of 4.7 percent from April and continuing what has been a volatile year. This is a useful reminder that the data by race/ethnicity is noisy but still disappointing that the leg down in April wasn't sustained.