Three years ago, we poised the question “Will there be enough workers?” Now we ask, “What does that same data tells us today?”

After examining the apparent disconnect between low unemployment and fairly stagnant wages / low inflation as the Phillips Curve appeared to no longer be functioning properly in August 2017, the next month in September 2017 we ponder the question “where will workers come from?”

At that time, we looked at labor force participation rate, the number of discouraged workers, and the unemployment rate. In the far corners of the business and economic news, there has been recent writings that the Phillips Curve has also been a victim to COVID-19. But, we concluded three year ago that the Phillips Curve did not seem to be working in the then economy. But, times have dramatically changed.

It doesn’t take an economist to see that the pandemic has and is playing havoc with these three specific measurements of employment.

 

During the past three recessions, as the unemployment rate increases, the labor force participation rate has declined. And that inverse relationship is especially dramatic in the current recession. Yes folks, we are likely still in a recession right now. With so many other developments dominating the news cycle, don’t feel bad that you missed the National Bureau of Economic Research’s announcement in early June 2020 that the economy peaked in February 2020 and therefore entered a recessionary period.

 

The labor force participation rate had been basically declining since early 2000. Although there are a multitude of reasons, such as changing demographics including declining retirement ages and policies encouraging college enrollments that removed many younger people from the workforce. Perhaps it’s time to rethink how the labor force participation rate is calculated.

The number of discouraged workers continues to rise immediately after a recession is officially declared over and the economy reenters growth mode. Why do their numbers continue to rise after a recession is over? Because many people who may have been sitting out the recession on the sidelines, think they can get a job soon after the recession is declared over. But, it takes time for companies to readjust their business and staffing plans and start to create jobs and hire to fill them.

Although the Phillips Curve may still be bending the same way, globalization  and regional economic conditions have muted effects on prices and made it somewhat irrelevant. Employment is still a lagging indicator. Hence the number of discouraged workers and even the unemployment rate continues to rise in the period immediately after the end of a recession. As the labor force participation rate plunged upon the onset of the pandemic, the number of discouraged workers increased. Although both these metrics have begun to reverse direction, they still have a ways to go before getting back to their pre-pandemic levels.

The same trends are seen with the number of discouraged workers and the unemployment rate. The official unemployment rate, after skyrocketing at the beginning of the pandemic and has dropped considerably, but is still at the level observed in late-2011 / early-2012. However, the current trend of a relatively high unemployment rate is at least partially due to other factors other than people not being able to secure a job such as rich unemployment benefits and workers staying home due to the lack of child care options.

To answer the question we poised three years ago if there will be enough workers — the answer is yes, but the question remains if people want to go back to work and if there will be enough jobs. Clearly the pandemic has changed the operations — and hence, the staffing requirements — of many sectors and industries. When the pandemic ends — and it will — how will staffing in the post-pandemic economy be affected? This country’s economy morphed from agrarian, to industrial, to manufacturing, to service, and to information-driven. Will there be such a stage labeled a “post-pandemic” economy? First, we have to see the Covid-19 in the rearview mirror but simultaneously keep an eye on what’s in front of us. The best advice is fasten your seat belts for what will likely be a bumpy ride.

 

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September 2020 Employment Report

Quick Recap

Although employment indicators and job numbers continue to improve in September, they did so at a continuing slowing pace.

The economy added a total of 661,000 nonfarm jobs in September that in of itself is a good number but is much less than the 1,489,000 it added in August as well as the July increase of 1,761,000 and pales to the 4,781,000 it added in June. A year ago in September 2019, it added 208,000 jobs . And not to lose perspective, in April, the economy lost almost 21,000,000 jobs

Average hourly wages were up only two cents an hour in September after rising 10 cents in August from July.

And Temporary help services has now added jobs for the fifth consecutive month but with a fairly anemic gain in September that was its smallest increase since growth resumed in May 2020.

 

Job Report

The Bureau of Labor Statistics reports that the economy added 877,000 private-sector jobs in September after increasing by 1,022,000 in August, gaining 1,526,000 in July, and growing by 4,729,000 in June.

The private Goods-producing sector was up 93,000 in September, which was a nice improvement from the 45,000 added in August as well as the 66,000 increase of July.

• Manufacturing was up 66,000 in September after adding 36,000 in August and increasing 41,000 in July.

• The Construction sector continued to build up its workforce with an increase of 26,000 in September on top of adding 17,000 jobs in August and gaining 31,000 in July.

• And Mining and logging reversed direction with a gain of 1,000 jobs in September after losing 8,000 in August and declining by 6,000 in July.

The private Service-providing sector added 784,000 jobs in September which would be a very nice number if not compared to the 977,000 it added in August, the increase of 1,460,000 it gained in July or especially the 4,244,000 it gained in June.

• Apparently, people are going in stores since the Retail trade sector added 142,400 jobs in September, but that was at a slower pace than the 261,200 it added in August or the 253,900 it gained in July.

• And the Wholesale trade sector continued to move forward and bucked the overall trend of slowing job growth  with an increase of 18,700 in September that followed a gain of 10,900 in August after declining by 19,400 jobs in July.

• Things were still humming along in Transportation and warehousing that added 73,600 jobs in September, which was a bit off the pace of August’s gain of 81,700 but better than the 48,000 increase seen in July.

• Financial activities continued to post accelerating growth with an increase of 37,000 in September that followed an increase of 26,000 in August after adding 15,000 in July.

• Growth for Professional and business services sector jobs slowed with a gain of only 89,000 in September after adding 188,000 in August and increasing by 162,000 in July. Computer systems design and related services was able to compute an increase of 11,700 jobs in September after 13,400 in August. Management and technical consulting services added 3,100 in September after adding 5,000 in August. Architectural and engineering services was able to draw plans for 13,100 more jobs in September that followed an increase of 17,000 in August.

• The private Education and health services sector was up only 40,000 in September — mainly due to a substantial decline in private Educational Services — after adding 170,000 in August. Home health care services continued to recover, again with an historically large increase of 16,200 in September after adding 14,400 in July.

• The Leisure and hospitality sector grew by 318,000 in September that was an improvement from the 143,00 it gain in August but less than the 633,000 it added in July or the 1,979,000 it gained in June.

The total number of Government jobs were down 216,000 in September. The federal government was down 34,000 mainly due to a decline in staffing for Census 2020, state government was down 48,000 mainly due to a decline in state government education jobs, and local government was 134,000, also due to a decline in local government education. Incidentally, USPS employment was relatively stable with a loss of only 200 jobs in September.

Temporary Help Services Roundup

Although Temporary Help Service continued to add jobs, it only gained 8,100 in September. This brings the total number of THS jobs to 2,474,700, which works out to a meager 0.3 percent sequential increase, and down 16.1 percent from September 2019.

Keep in mind that despite the weak growth in September, Temporary Help Services has added 426,800 jobs since April when it plunged by 840,500 jobs.

For a chart of temporary help’s growth from January 1991 to September 2020 and comparing its trend to total employment, click here. 

 

 

In September 2020, temporary help services market share, which is its portion of all jobs, took a rest at 1.7462 percent down from 1.7486 the previous month. A year ago in September 2019 it was 1.9483 percent and two years ago in September 2018 it was 2.0013.

 

Household Survey

BLS is still experiencing COVID-19 related errors with the data [emphasis is ours – ed.]: “For March through August, BLS published an estimate of what the unemployment rate would have been had misclassified workers been included. Repeating this same approach, the overall September unemployment rate would have been 0.4 percentage point higher than reported. However, this represents the upper bound of our estimate of misclassification and probably overstates the size of the misclassification error.

“According to usual practice, the data from the household survey are accepted as recorded. To maintain data integrity, no ad hoc actions are taken to reclassify survey responses.”

Officially, the unemployment rate in September was 7.9 percent and that is lower than the published August rate of 8.4 percent.

The number of employed persons increased 275,000 as the number of unemployed persons declined 970,000. The size of the entire labor force shrank by 695,000 and there were 879,000 more people considered as not in the labor force in September.

The labor force participation rate declined 0.3 percentage points to 61.4 percent in September from August and the employment-to-population ratio was up 0.1 to 56.6 percent.

The number of discouraged workers is up from a year ago to 556,000 from 321,000 in September 2019.

BTW, we maintain an updated table of many major employment as well as other general indicators here or here for the mobile version.