Jobs Report: Live Analysis of September’s Weak Showing

Daily Business Briefing

Oct. 8, 2021, 10:08 a.m. ET

Oct. 8, 2021, 10:08 a.m. ET

April

June

Sept.

Jan. ’21

April

–5 million jobs since Feb. 2020

+17.4 million since April 2020

+194,000
in September

152.5 million jobs in February 2020

The latest coronavirus wave led to a second straight month of disappointing job growth in September, as Americans avoided restaurants and travel and were reluctant to rejoin the work force.

U.S. employers added 194,000 jobs in September, the Labor Department said Friday. That was down from 366,000 in August and far below the more than one million jobs added in July, before the more contagious Delta variant led to a spike in coronavirus cases across much of the country. The leisure and hospitality sector, which had been a main driver of job growth before Delta emerged, added fewer than 100,000 jobs for the second straight month.

The unemployment rate fell to 4.8 percent, but that was partly a result of people leaving the labor force entirely — a sign that public health fears and other disruptions from Covid are still keeping people from looking for work.

“Employment is slowing when it should be picking up because we’re still on the course set by the virus,” said Diane Swonk, chief economist for the accounting firm Grant Thornton.

5

10

15%

Jan. ’20

Jan. ’21

The data released on Friday was collected in mid-September, when the Delta wave was near its peak. Since then, cases and hospitalizations have fallen in much of the country, and more timely data from private-sector sources suggests that economic activity has begun to rebound. If those trends continue, job growth could approach its pre-Delta pace later this fall.

“This report is a glance in the rearview mirror,” said Daniel Zhao, an economist at the career site Glassdoor. “There should be some optimism that there should be a reacceleration in October.”

Nonetheless, the recent slowdown shows the economy’s continued vulnerability to the pandemic, and the challenges that will remain even once it is over. There are five million fewer people on U.S. payrolls than in February 2020, and 2.7 million people have been out of work for six months or more, the standard threshold for long-term unemployment. Yet the number of job openings is at a record high, and many employers report having a hard time filling positions.

Earlier this year, many economists and policymakers hoped that September would be the month when that logjam began to abate, as schools and offices reopened and expanded unemployment benefits ended. That easing hasn’t happened. The resurgence of the pandemic delayed office reopenings and disrupted the start of the school year, and made some people reluctant to accept jobs requiring face-to-face interaction. At the same time, preliminary evidence suggests that the cutoff in unemployment benefits has done little to push people back to work.

“I am a little bit puzzled to be honest,” said Aneta Markowska, chief financial economist for the investment bank Jefferies. “We all waited for September for this big flurry of hiring on the premise that unemployment benefits and school reopening would bring people back to the labor force. And it just doesn’t seem like we’re seeing that.”

Ms. Markowska said more people might begin to look for work as the Delta variant eases and as they burn through savings accumulated earlier in the pandemic. But some people have retired early or have found other ways to make ends meet and may be slow to return to the labor force, if they come back at all. That could have long-lasting economic effects, particularly if the recent slowdown in hiring persists.

In the meantime, employers are raising wages and offering other inducements to lure applicants. Average earnings rose 19 cents an hour in September and are up more than $1 an hour over the last year, after a series of strong monthly gains.

+5

+10

+15

+20%

2019

2020

2021

That, combined with benefits such as the child tax credit that have provided a financial cushion to low-income families, has arguably put workers in their strongest bargaining position in decades, said William M. Rodgers III, director of Institute for Economic Equity at the Federal Reserve Bank of St. Louis.

“This period right now represents the first time in a long time where people feel they have some security,” Mr. Rodgers said. “And it’s probably, for many of them, an odd feeling, because they haven’t had it for a long time.”

74

76

78

80

82

84%

Jan. ’20

Jan. ’21

More than a year and a half into the pandemic, the active U.S. labor force is not bouncing back much, an alarming reality that could weigh on the economy’s growth — and bad news for policymakers at the Federal Reserve and White House who have been hoping to see worker participation rebound.

The share of people who were working or looking for work last month — the so-called labor force participation rate — dipped to 61.6 percent, down slightly from the prior month. Participation for people in their prime working years, defined as 25 to 54 years old, also ticked down.

At the same time, average hourly earnings climbed 0.6 percent in September from the month before, more than the 0.4 percent economists had expected, and have jumped by 4.6 percent over the last year.

The combination of stagnant labor force participation and rising wages creates an alarming picture for economists and investors, one in which costs are increasing as the outlook for growth is increasingly grim. With fewer people working and earning paychecks, the economy can produce less over time. And as employers have to pay more to attract workers, they may have to increase prices to cover their rising costs, feeding into high inflation.

When workers who have left the labor market will return to it — and whether some may be sidelined permanently — remains one of the most critical questions facing economists and policymakers.

Companies eager to hire had hoped that September might be a turning point, as schools reopened and expanded unemployment benefits expired, prompting people who were out of work because of child care issues — or were afforded more flexibility by government help — to return to the job search.

But that prognosis was complicated by timing and the coronavirus. The September jobs report survey was taken shortly after the expanded benefits expired, which may have made for a messy read on any effect from their expiration. And it came as infections from the Delta variant were high, potentially keeping people at home.

There had been just over 2,000 school closings for coronavirus outbreaks across nearly 470 school districts in 39 states through mid-September, Lael Brainard, a Fed governor, pointed out in a recent speech.

“The possibility of further unpredictable disruptions could cause some parents to delay their plans to return to the labor force,” Ms. Brainard warned.

Fed officials, who have been buying $120 billion a month in bonds and holding interest rates near zero to keep borrowing cheap and help the economy, will continue to watch for a pickup in the participation rate.

The report is not good news for the Fed, but it may not be enough to derail its plans to begin slowing asset purchases as soon as next month. Officials have repeatedly said that they are basing that decision on cumulative job market progress rather than on the latest data.

Federal Reserve officials received bad news in the September jobs report, which showed weak hiring and stagnating participation in the labor force — suggesting that the labor market may take time to heal. But with inflation high and wages picking up briskly, the risk is that central bank officials may not have the breathing room to wait for a full recovery.

The Fed has two jobs, fostering maximum employment and keeping inflation low and steady. In recent decades, inflation has been contained or even tepid, so central bankers have been able to give the labor market plenty of room to heal. But today, inflation has jumped higher, and rising wages suggest that employers may need to continue to lift prices to cover their costs. At the same time, millions of jobs are still missing compared to before the pandemic, and they are only trickling back.

Those trends could prod the Fed to make tough judgment calls about their policy help, which they had been preparing to pull back only slowly. Jerome H. Powell, the Fed chair, and his colleagues have been pumping $120 billion into markets each month and holding interest rates near zero to keep borrowing costs cheap and credit flowing easily, helping to stoke demand and encouraging employers to expand and hire.

Officials have signaled that they will soon begin to slow the bond purchases — something they could announce as soon as November based on progress in the labor market. The September jobs report probably will probably not derail those plans, which officials have said were based on cumulative job gains, and not a single month’s data. The United States has regained more than 17 million jobs since the worst depths of the pandemic.

Yet Fed policymakers have repeatedly promised that even as they pull back on bond buying, they will continue supporting the economy with low rates — their more traditional and more powerful tool — for as long as it needs their help. If rapid inflation looks poised to stick around and the labor market is taking a long time to heal, though, they may find themselves forced to lift rates sooner in the jobs rebound than they would like.

“This is not the situation that we have faced for a very long time, and it is one in which there is a tension between our two objectives,” Mr. Powell said during a recent public appearance. He later added that “managing through that process over the next couple years, I think, is the highest and most important priority, and it’s going to be very challenging.”

Central bank officials are hoping that jobs lost during the pandemic return soon, but progress in recent months has been stop and start. Employers added 194,000 jobs last month, disappointing compared with economist forecasts, which had called for half a million.

Inflation came in at 4.3 percent in August, far above the central bank’s goal, which is to average 2 percent over time.

The pop in prices in 2021 has been driven higher almost entirely by pandemic quirks. Strong consumer demand for refrigerators and computers has overwhelmed supply chains at the same time as coronavirus-tied factory shutdowns have delayed parts production. The combination has led to shortages for items as varied as rental cars and washing machines, pumping up prices.

Officials still expect the price pressures to prove temporary. But it has become increasingly clear that, while the drivers are mainly one-offs, they could linger for months. Shipping routes are struggling to catch up, pandemic outbreaks continue to force factory closures, and now a jump in raw goods prices threatens to keep price gains elevated.

The Fed is closely watching to make sure that longer-term inflation expectations remain at healthy levels. Should consumers and investors come to expect higher inflation, they might change their behavior, creating a self-fulfilling prophesy.

Some key gauges of consumer price outlooks have begun moving up. And Fed officials are also watching wage data, because when wages are climbing quickly and companies have to lift prices to cover their costs, it can set off a cycle that locks in rapid inflation.

Average hourly earnings climbed 0.6 percent in September from the month before, more than economists in a Bloomberg survey had expected.

That combination raises an unhappy possibility: The Fed might find itself under pressure to lift interest rates and cool off the economy before employment has fully rebounded.

There is little that a central bank can do to spur better port capacity or more apartments, but it could arguably calm demand by lifting interest rates. With fewer consumers buying condos, couches and lawn furniture, factories, homebuilders and cargo ships might catch up, helping to alleviate cost pressures.

But higher rates would also slow business growth and hiring, trapping the pandemic unemployed on the labor market’s sidelines. That’s why Mr. Powell and his colleagues are counseling patience, hoping to avoid overreacting to a price pop that will peter out.

U.S. stocks and government bond yields fluctuated on Friday after the government reported that U.S. employers added far fewer jobs in September than expected, while wage gains were faster than anticipated.

Employers added 194,000 jobs last month, compared with economists expectations of about 500,000, the Labor Department said.

Employment in the leisure and hospitality sectors rose by 74,000 jobs in September, after flatlining last month amid evidence that labor shortages and the spread of the Delta variant were hampering hiring. The jobs data released on Friday was collected in mid-September, when the Delta wave was near its peak, but since then, cases and hospitalizations have fallen.

The S&P 500 swung between gains and losses in early trading. Stocks in Europe also fluctuated.

The yield on two-year Treasury notes was little changed at 0.30 percent and the yield on 10-year notes was little changed at 1.58 percent.

Slowing jobs gains could weigh on decisions at the Federal Reserve to reduce monetary stimulus in the form of government bond purchases, but traders and policymakers are also watching closely for signs that higher prices will lead to longer lasting inflation and might prompt more action from the central bank. The jobs report showed average hourly wages rose 0.6 percent in September, more than economists were forecasting.

Officials have signaled that they will soon begin to slow the bond purchases — something they could announce as soon as November based on progress in the labor market. The September jobs report probably will not derail those plans, which officials have said are based on cumulative job gains, and not a single month’s data.

“The low bar for the Fed to announce quantitative easing tapering was surpassed,” Lydia Boussour, the lead U.S. economist at Oxford Economics, wrote in a note. “And, with debt ceiling shenanigans pushed back until December 3, the road is clear for an announcement at the November FOMC meeting.”

The report from the Labor Department also showed the unemployment rate fell to 4.8 percent in September from 5.2 percent the previous month. Though, the participation rate in the labor force dipped to 61.6 percent.

The Economic Injury Disaster Loan Advance, an emergency relief program hastily rolled out in the early days of the pandemic, had such poor fraud protections that it improperly doled out nearly $4.5 billion to self-employed people who said they had additional workers — even those who made wildly implausible claims, like having one million employees.

The $20 billion program offered small businesses immediate grants of up to $10,000 in the months after the pandemic shuttered much of the economy. But there was no system to catch applications with “flawed or illogical information,” Hannibal Ware, the Small Business Administration’s inspector general, wrote in a report released on Thursday.

Nearly 5.8 million applicants received grants based on their company’s head count: $1,000 each for up to 10 workers. Sole proprietors and independent contractors who employed only themselves should have collected a maximum grant of $1,000 — but many collected bigger checks.

Some of the claims were outright absurd. Hundreds of applicants received the maximum grants after saying that they employed more than 500 workers, a number that would generally make them ineligible for the small business program. Fifteen said they had one million employees — a figure that would put them in league with Amazon and Walmart.

The report, which described how the agency could have spotted bogus applications by taking even rudimentary steps to prevent fraud, was the latest black eye for the S.B.A. READ THE ARTICLE →

Credit…Justin Kaneps for The New York Times
  • Tesla will move its headquarters from California to Texas, where it is building a new factory, its chief executive, Elon Musk, said at the company’s annual shareholder meeting on Thursday. The move makes good on a threat that Mr. Musk issued more than a year ago when he was frustrated by local coronavirus lockdown orders that forced Tesla to pause production at its factory in Fremont, Calif. Mr. Musk said the company would keep that factory and expand production there. READ MORE →

  • Google said on Thursday that it would no longer display advertisements on YouTube videos and other content that promote inaccurate claims about climate change. The decision, by the company’s ads team, means that it will no longer permit websites or YouTube creators to earn advertising money via Google for content that “contradicts well-established scientific consensus around the existence and causes of climate change.” And it will not allow ads that promote such views from appearing. READ MORE →

Credit…Pool photo by Clemens Bilan

WASHINGTON — The tenure of Kristalina Georgieva as managing director of the International Monetary Fund faces a pivotal moment on Friday, when the fund’s executive board will meet to decide whether she should continue to be its leader after allegations that she pressured staff to manipulate a report to placate China when she was a top World Bank official.

This week, the executive board spent hours questioning Ms. Georgieva about her actions. It also interviewed lawyers from WilmerHale, the firm that conducted the World Bank’s internal review of the circumstances surrounding the Doing Business survey. The review, published last month, concluded that Ms. Georgieva had played a central role in meddling with the report, raising questions about her judgment and ability to continue leading the I.M.F.

Ms. Georgieva has denied the allegations, and in a meeting with the board on Wednesday she offered a forceful rebuttal.

“The WilmerHale Report does not accurately characterize my actions with respect to Doing Business 2018, nor does it accurately portray my character or the way that I have conducted myself over a long professional career,” Ms. Georgieva said in a statement to the board, which was obtained by The New York Times.

Mr. Georgieva, a Bulgarian economist who assumed the top I.M.F. job in 2019, also criticized the nature of the World Bank investigation and said she had been misled.

“The email from WilmerHale requesting my participation said clearly that I was not a subject of the investigation and assured me that my testimony was confidential and protected by World Bank staff rules, which guarantee due process,” Ms. Georgieva said. “None of this proved to be true.”

The controversy has raised questions about China’s influence in multilateral institutions. It has also become a distraction for the I.M.F. as it is trying to help coordinate the global economic response to the pandemic. Prominent economists have publicly debated whether Ms. Georgieva should step down. The Economist magazine called last month for her resignation.

The United States, which is the fund’s largest shareholder, has yet to offer public support, and officials have declined to say if she should stay in the job.

“There is a review currently underway with the I.M.F. board, and Treasury has pushed for a thorough and fair accounting of all the facts,” said Alexandra LaManna, a Treasury spokeswoman. “Our primary responsibility is to uphold the integrity of international financial institutions.”

Former World Bank officials have described Ms. Georgieva as a polarizing figure, but she has generally won praise at the I.M.F. When she assumed the job, she quickly restructured the fund to give her more direct control over its daily operations. That included removing David Lipton, a longtime I.M.F. official and its first deputy managing director, before his term expired.

Mr. Lipton is now a top adviser to Treasury Secretary Janet L. Yellen, who will have significant input as to whether Ms. Georgieva remains in the job.

Treasury officials have been debating how to respond to the allegations against Ms. Georgieva. A person familiar with the deliberations said that Mr. Lipton has been among the officials who have been supportive of Ms. Georgieva, who he worked closely with while she was at the World Bank and he was at the I.M.F.

Republicans and Democrats in Congress have expressed concern about Ms. Georgieva’s actions at the World Bank and called on Ms. Yellen to ensure “full accountability.”

The United States traditionally selects an American to be president of the World Bank, while the managing director of the I.M.F. is usually from Europe.

The I.M.F.’s executive board could make a decision about whether it continues to have confidence in Ms. Georgieva when it meets on Friday.

The annual meetings of the World Bank Group and the International Monetary Fund take place next week.

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