The September jobs report is acutely important, as it’s a referendum on how Federal Reserve Chair Jerome Powell’s inflation-fighting efforts are working out. Powell previously announced that he needed to cool down the economy to bring down record-high inflation levels. Part of this quantitative tightening program will purposely cause layoffs, as businesses cut costs. The thought process is that when people lose their jobs or there is the threat of job insecurity, they won’t spend as much money as they used to.
With this lens in mind, the data from the September jobs report is a mixed bag. Job growth was solid, but was lower than expected. The numbers indicate that the Fed’s inflation-fighting initiatives have been somewhat effective, as hiring significantly fell short of prior months before the Fed’s policy went into effect.
Modest Job Growth, But Fewer Jobs Compared To Past Months’ Performance
Nonfarm payrolls increased 263,000 for the month, falling short of the projected 275,000. Despite the Fed’s efforts to dampen the economy, the labor market remained strong in September, showing signs of resiliency. Powell still has to contend with a strong job market with continued hiring, which galvanizes inflation. Showing the dichotomy, the unemployment rate fell to 3.5%, representing a 50-year low. Additionally, average hourly earnings rose firmly.
Jobs Report Highlights
- In September, notable job gains occurred in leisure and hospitality (+83,000) and healthcare (+60,000). Healthcare has returned to its pre-pandemic level.
- The number of long-term unemployed—those jobless for 27 weeks or more- remained around 1.1 million.
- The labor force participation rate remained steady at 62.3% in September.
- The number of part-time employed decreased by 306,000 to 3.8 million in September.
- In September, 1.4 million people reported their employer closed or lost their business due to the pandemic; therefore, they could not work. This number is down from 1.9 million in August and significantly down from 49.8 million in May 2020.
- Employment in professional and business services continued its upward trajectory, adding 46,000 jobs.
- Temporary services continued to trend upward (+27,000).
Layoffs And Rumors
September’s numbers signal the Fed is making strides in achieving its goals of muting hiring, which will aid in depressing inflation. There are still more than 10 million jobs available; although, there are now 1.1 million fewer jobs than in previous months. The question is whether the vast majority will be filled or not. Powell has to have balance in wringing out the excesses in the economy and job market. Over the weekend, rumors spread through Twitter questioning the financial situations at Credit Suisse and Deutsche Bank and whether they could be the new Lehman Brothers.
Although the U.S. is contending with runaway inflation, and high interest rates that cause higher borrowing costs for both businesses and families, consumers continue to spend and firms are hiring. Concerns have been raised in sectors, ranging from layoffs in the startup and tech sectors to FedEx, Amazon and Walmart enacting hiring freezes and laying off staff.
Meta Walks Away From A $110 Million Lease
In addition to layoffs, hiring freezes and job rescissions, companies are starting to look at their real estate holdings and leases. High inflation, costs increase and a belt-tightening environment are all causing executives to reevaluate the office when many people want to work remotely. There may be long-term savings if they jettison their real estate holdings.
Meta, the parent company of Facebook, WhatsApp and Instagram, is walking away from a $110 million lease for 200,000 square foot property on Park Avenue. The social media giant also has plans to reduce its real estate footprint in San Francisco, as workers demand remote work and the company is enacting a hiring freeze and downsizing. Meta will change the layouts of the office space by placing desks and teams closer together, in an effort to make the space feel more lively.
Job Market Falsehoods
According to the U.S. Department of Labor, there are 1.7 job openings for every unemployed person, down from a couple of months ago. This metric is misleading, as every open job does not match up with every unemployed person’s skills and background.
Many of these jobs are positions in retail, the food industry, warehouses, fulfillment centers and other front-line roles. The jobs don’t pay well, especially with inflation eating into people’s earnings. Workers want to hold out for better, higher-quality opportunities with future growth potential.
The data ignores that the Labor Department’s household survey shows that there is an increase in people juggling multiple jobs to stay afloat and put food on the table. It’s questionable if the various jobs are counted as one role or many, which can distort the real numbers. There is a noticeable drop in full-time permanent jobs and an increase in part-time roles.
Source: Forbes
