Good and bad seen in employment report, observers say

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September nonfarm payrolls grew by 661,000, off from the 1.489 million jobs added in August, while the unemployment rate declined to 7.9% from 8.4% in August, the labor Department reported Friday.

Economists polled by IFR Markets expected 850,000 jobs to be added and an 8.2% unemployment rate.

“The continued growth in jobs is a positive indication,” said Beth Akers, Manhattan Institute senior fellow and former Council of Economic Advisors economist. “It means the recovery is continuing. But unfortunately, the rate of growth has slowed to a concerning degree. The number of jobs in the economy remains significantly below pre-COVID levels.”

While describing the report as “solid,” Morgan Stanley researchers noted “some soft underlying details, but downside appeared almost entirely related to uneven school openings, which likely contributed to education job losses as well as the drop in labor force participation.”

With the numbers of jobs added slowing, Brian Coulton, Fitch Ratings’ chief economist, said: “The easy part of the labor market recovery is largely behind us now. A lot of jobs still came back in September but the pace of improvement is clearly slowing. The sobering statistic here is that 36% of unemployed are now classed as permanent job losers, up from 14% in May.”

“There is a tremendous amount of churn in this job market,” said Mike Fratantoni, senior vice president and chief economist for the Mortgage Bankers Association.The pace of layoffs remains high, and even though many employees are being rehired, net employment gains are slowing. Total employment remains 7% below its February level.”

The 877,000 gain in private employment was “noteworthy,” he said. “Job growth is going to be more difficult in the coming months. Workers on temporary layoff continue to be called back to work, but the number of permanent job losses have increased by 2.5 million since February. More businesses are struggling to stay afloat.”

Scott Anderson, chief economist at Bank of the West, said: “Most concerning to me is the large decline in the labor force participation rate in September to 61.4% from 61.7% in August, suggesting more working age people are just deciding to give up on work. You have to go back all the way to 1976 to find labor force participation rates at these low levels. The U.S. labor force has shrunk 2.4% from year ago levels.”

The drop in the unemployment rate, he said, “only modestly improves our forecast for the Q4 unemployment rate to an average 7.7% from 7.8% previously, and we made no downward revision to our unemployment rate forecasts for 2021.”

Bank of the West expects the jobless rate to average 6.3% in the last quarter of 2021, “as GDP growth in the United States downshifts into more of a U-shaped pattern from the V-shaped reopening rebound we have been in over the past five months.”

Separately, the University of Michigan’s consumer sentiment index gained to 80.4 in the final September read from 78.9 earlier in the month and 74.1 in August.

The expectations index climbed to 75.6 from 68.5 in August and the current conditions index increased to 87.8 from 82.9.

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