As per my reporting earlier this week, I was looking for 3 things: (1) whether the unemployment rate, which follows initial jobless claims, would remain elevated compared with 1 year ago (it did), whether average hourly earnings gains for non-supervisory workers would continue to decline (they did), and whether jobs growth itself would suggest a “soft landing” stabilization or continue to decelerate (the data was equivocal, but is more likely demonstrating continued deceleration).

In short: yes, the leading indicators work.

This month’s data was significantly affected by the UAW strike. Where important, I have given the data ex-strike as well.

Here’s my in depth synopsis.

HEADLINES:

• 150,000 jobs added (183,000 ex-strike). This is the lowest except for June. On a YoY basis, jobs are up 1.9%, the lowest % gain since March 2021.
• August and September were both revised lower, by -62,000 and -39,000, respectively, for a net of -101,000. This continues the pattern that we have seen all year except for one month ago. As a result, the 3 month moving average declined to 204,000 (211,000 ex-strike) from a revised 233,000 last month. But the June-August average of 167,000 remains the low.
• Private sector jobs increased only 99,000 (132,000 ex-strike). Government jobs increased by 51,000. This is a new low, including the strike. Excluding the strike, June-s 104,000 remains the low.
• On the other hand, the alternate, and more volatile measure in the household report actually *declilned* by -348,000 jobs. The YoY% gain in this report is +1.7% (which is the average YoY gain for this whole year).
• The U3 unemployment rate rose 0.1% to 3.9%, tied with last month for the highest since January 2022 . The civilian labor force, the denominator in the figure, declined (by -201,000), and the numerator, the number of unemployed, rose (by 146,000).
• The U6 underemployment rate rose 0.2% to 7.2%, but still close to the highest since February 2022. 
• Further out on the spectrum, those who are not in the labor force but want a job now declined -77,000 to 5.373 million, vs. its post-pandemic low of 4.925 million set this past March.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn.  These were weakly positive:

• the average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, was unchanged at 40.7, equal to its lows earlier this year and down -0.8 hours from its February 2022 peak of 41.5 hours.

• Manufacturing jobs declined by -35,000 (-2,000 ex-strike).
• Within that sector, motor vehicle manufacturing jobs declined -33,000 (including the UAW strike). 
• Construction jobs increased by 23,000.
• Residential construction jobs, which are even more leading, rose by 3,700. There has been a sharp rebound in the past three months, but so far It continues to appear likely that January was the peak for this sector.
• Goods jobs as a whole declned -11,000 (Up +22,000 ex-strike). These should decline before any recession occurs. They remain up 1.2% YoY (including the strike), which is nevertheless an average pace compared with most of the last 40 years.

• Temporary jobs, which have generally been declining late last year, rose 6,600, but remain down -228,500 since their peak in March 2022.
• the number of people unemployed for 5 weeks or less rose 217,000 to 2,268,000, the highest level since March.

Wages of non-managerial workers

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased $.10, or +0.3%, to $29.16, a YoY gain of +4.4%. This is the lowest since June 2021.

Aggregate hours and wages: 

• the index of aggregate hours worked for non-managerial workers declined -0.2%, and is up 0.7% YoY, the lowest since March 2021.

•  the index of aggregate payrolls for non-managerial workers rose less than 0.1%, and is up 5.2% YoY, a -0.5% decline from last month, and the lowest since March 2021. Nevertheless this is 2.0% above the most recent inflation rate, meaning average working class families have more buying power.

Other significant data:

• Leisure and hospitality jobs, which were the most hard-hit during the pandemic, rose 19,000, which is still -223,000, or -1.3% below their pre-pandemic peak.
• Within the leisure and hospitality sector, food and drink establishments rose declined -7,500, which remains -14,100, or -0.1%, below their pre-pandemic peak.
• Professional and business employment rose 15,000. These tend to be well-paying jobs, But this series has been decelerating, and is currently up 1.0% YoY, its lowest YoY gain since March 2021.
• The employment population ratio declined -0.2% to 60.2%, vs. 61.1% in February 2020.
• The Labor Force Participation Rate declined -0.1% to 62.7%, vs. 63.4% in February 2020.

SUMMARY

With the possible exception of June, this month’s report was the weakest in over 2.5 years, as both the Establishment and Household portions were either weakly positive (the Establishment side) or negative (the Household side). 

Although the leading numbers in the report were on net positive, taking out the effects of the strike, private job gains were the poorest since December 2020 except for this past June. Gains in leisure and hospitality, hard hit during the pandemic, and the good-paying professional and business sector, were both anemic, as they have been for the past several months as well. Aggregate hours declined, and aggregate payrolls were flat. Unless there is an actual negative print in this month’s CPI report, this means that the real, inflation adjusted buying power of the middle and working classes will decline again. As anticipated via YoY jobless claims, the unemployment and underemployment rates both remained elevated compared with last year, and appear to be in an uptrend. 

There were positive signs, though, with continued gains in construction jobs in particular. The manufacturing work week has stopped declining and has stabilized.

Since June, jobs growth *may* have stabilized, but the YoY% gains have continued to decline at a rate of -0.1% each month on average. The evidence is not clear cut, but it is more likely that the decelerating trend is in place. If the “soft landing” in the economy is just a phase that we have been passing through, that will be revealed the first time they’re more monthly jobs gains under 100,000.

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