The September employment report exceeded many economists’ expectations, adding a welcomed 248,000 jobs to the economy compared with an average monthly gain of 213,000 over the prior 12 months. Marking a milestone, the September unemployment rate fell to 5.9 percent, the lowest number the nation has seen since 2008. The U.S. is on track in 2014 to add the most jobs since 1999.
The majority of job growth occurred in professional and business services, retail trade and health care. Professional and business services gained 81,000 jobs in September compared to the sector’s 56,000 per month increase recorded over the prior 12 months and nearly twice the number of jobs that were added in August. Within the professional and business sector, employment services added 34,000 jobs, management and technical consulting services gained 12,000 and architectural and engineering services posted 6,000 new jobs.
In retail trade, job growth rose by 35,000 in September. Food and beverage stores added 20,000 jobs, largely reflecting the return of workers who had been off payrolls in August due to employment disruptions at a grocery store chain in New England. Health care added 23,000 jobs in September, staying consistent with the prior 12-month average gain of 20,000 jobs per month.
Temporary Help Services Reaches New Highs
The temporary help services sector has performed consistently strong over the past several months and did so again in September when the sector jumped by 19,700 jobs to 2,933,500—resulting in 0.7 percent sequential growth and year-on-year growth of 8.6 percent. Another boost to this sector was the Bureau of Labor Statistics (BLS) revised August report, which changed the previously reported 13,000 jobs gain to 24,600 jobs.
As a result, the temporary help service’s market share has shown steady growth and reached an all-time high of 2.104 percent in September– the first time the number has ever been above 2.1 percent. In contrast, this industry’s market share was 1.974 percent in September 2013.
Revised July and August Reports
Reinforcing the strong September job gains were the BLS’ revised labor reports for July and August. In what previously had been regarded as a disappointing report, the August BLS payroll count was revised from 142,000 new jobs to 180,000, an improved number from the prior report but the first time the figure came in below 200,000 since January 2014. The August figure was affected by a strike at a New England grocery store chain, where workers have now returned to work.
The July number was also revised higher from more than 212,000 new jobs to more than 243,000. Total employment gains in July and August were therefore 69,000 greater than what the BLS previously reported.
Wage Growth One Last Thorn in Economy’s Side
A key figure that economists continue to watch closely is wage growth, which represents the last piece of full economic recovery. Unless wages begin to increase faster, the U.S. economy will fall short in 2014 of its prerecession historic growth rate of 3.3 percent a year. The economy currently averages about 2 percent annual growth, the same number that has been recorded throughout the recovery.
In previous post-recession environments, accelerated hiring eventually drove up wages. Although most economists expect this scenario to occur again, wage growth currently remains stagnant. For example, in September the average U.S. hourly wage dropped a penny to $24.53 despite the increase of 248,000 jobs. And the 12-month increase in hourly wages fell to 2 percent from 2.1 percent in August—just slightly faster than the rate of inflation.
Labor Market Participation Falls to 36-Year Low
The labor market participation rate fell to 62.7 percent in September, marking the lowest level since February 1978. The situation is causing confusion among many economists given the strong job gains and drop in unemployment.
Demographics are partly to blame, according to a Federal Reserve paper that associates much of the decline to the aging of the baby-boom generation. While there now is a greater number of older workers than ever before (because of longer lifespans, better health and the need to work due to lower savings rates), this generation is still retiring in great numbers.
The other factor reducing workforce participation is the number of people who have simply left the labor market because they are unable to find a job. The same Federal Reserve paper says as much as 1 percent of the workforce decline from its peak of 67.3 percent in 2000 reflects people who want to work but are discouraged and ultimately discontinue their employment search.
Employee and Consumer Confidence Remain Level
Confidence levels were little changed month-over-month according to the September Randstad U.S. Employee Confidence Index. The monthly index, which tracks U.S. workers’ perspectives around jobs and the economy, increased in September to 56.4 from 55.9 in August. When it comes to workers’ confidence in their own employment situation, more than one-quarter of workers (26 percent) say they are confident in the availability of jobs, the same amount as in August. Similarly, 44 percent of workers say they are confident in their own ability to find a new job. Although overall confidence levels among workers were consistent in September, the index has remained well above 50 percent throughout 2014, compared to the start of the recession when it never climbed above the 40 percent range.
The Conference Board’s Consumer Confidence Index decreased slightly in September and now stands at 86.0, down from 93.4 in August—a retreat after four consecutive months of improvement. This less-than-positive assessment of the job market is most likely due to the recent softening in job growth and was the sole reason for the decline in consumers’ assessment of present-day conditions.