U.S. Payroll Growth Is Double Expectations in September; Earnings Growth Is Steady & Slow; Unemployment Rate Unchanged

The job market is firm. Nonfarm payrolls increased 336,000 during September (2.1% y/y) after rising 227,000 in August, revised from 187,000, and 236,000 in July, revised from 157,000. The September reading was the strongest since January & triple June’s 105,000 increase. During the first nine months of the year, payrolls rose an average 260,000 per month. Expectations had been for a 165,000 rise in the Action Economics Forecast Survey.

Average hourly earnings edged 0.2% higher in September, the same as in August. The 4.2% y/y earnings increase remains below a high of 5.9% y/y in March 2022. A 0.3% September increase had been expected.

The unemployment rate, measured in the household survey, held steady at 3.8% in September. It remained the highest rate since February 2022 and increased from a 3.4% April low. Expectations had been for a 3.7% rate. Household employment increased 86,000 after rising 222,000 in August. The labor force rose 90,000 following a 736,000 rise. The overall unemployment rate, including workers who were marginally attached & working part-time for economic reasons, eased to 7.0% from 7.1% in August.

In the establishment survey, private-sector employment rose 263,000 (1.9% y/y) following a 177,000 August gain, revised from 179,000. Factory sector jobs increased 17,000 (0.7% y/y) after an 11,000 August rise. Construction sector employment rose 11,000 (2.7% y/y) after a 36,000 August increase.

Private service-producing employment strengthened 234,000 in September (2.0% y/y) after improving 130,000 in August. Industry performance remained mixed. Leisure & hospitality payrolls rose 96,000 (4.1% y/y). Education & health care jobs gained 70,000 (4.1% y/y) while trade, transportation & utilities employment rose 45,000 (0.5% y/y). Professional & business jobs rose 21,000 (1.2% y/y), including a 4,200 decline (-5.5% y/y) in temporary help employment. Financial sector employment gained 3,000 (0.9% y/y) but information sector payrolls fell 5,000 (-2.4% y/y).

Government sector payrolls rose 73,000 last month (2.8% y/y) after increasing 50,000 in August. Local government payrolls rose 38,000 (2.4% y/y) and state government jobs increased 29,000 (3.8% y/y). Federal government jobs gained 6,000 (3.1% y/y).

The 0.2% September gain in private-sector average hourly earnings reflected a 0.3% rise (5.3% y/y) in goods-producing earnings. Construction sector earnings rose 0.3% (5.1% y/y) and factory sector earnings also rose 0.3% (5.2% y/y). In the private services sector, earnings rose 0.2%. The y/y increase of 3.9% is reduced from a high of 6.1% in March 2022. Financial activities earnings rose 0.4% (4.9% y/y). Trade, transportation & utilities sector pay also increased 0.4% (4.9% y/y) last month. Professional & business sector earnings improved 0.3% (4.3% y/y). Private education and health services pay improved 0.2% (3.2% y/y) for a second consecutive month. Leisure & hospitality earnings held steady (4.7% y/y), well below the 14.0% y/y peak in December 2021. Information sector pay edged 0.1% lower (+0.9% y/y) in last month.

The length of the average workweek held steady at 34.4 hours in September and remained down from a peak of 35.0 hours in January 2021. The workweek in the goods-producing sector held at 39.8 hours. The construction sector average workweek eased to 39.0 hours, while the factory sector workweek edged up to 40.1 hours. The average workweek in the private service sector was 33.3 hours for a seventh consecutive month, but remained below the 34.0 hour high early in 2021. Financial sector hours held at 37.4 and information services hours remained at 36.3 for the fourth straight month. Professional & business service hours held at 36.5 hours for the fourth consecutive month, but were down from a January 2021 high of 36.9, while leisure & hospitality hours rose to 25.6 in September.

The private sector’s aggregate weekly hours index, a key indicator of production and income, rose 0.2% (1.3% y/y) following a 0.4% August gain. For Q3’23, the index rose 1.5% (AR) from the second quarter.

In the household survey, the steady 3.8% unemployment rate in September was accompanied by a stable 62.8% labor force participation rate. The participation rate for teenagers fell to 36.5% and remained below a November high of 37.8%. For workers aged 20-24, the rate rose to 71.4% and compared to a high of 72.0% in February & March. For workers aged 25-54, the rate held at 83.5% in September, the highest level since May 2002 and increased from 81.6% two years earlier. For individuals 55 and over, the rate held at 38.8% in September and remained well below its 40.5% peak in July 2019.

The employment/population ratio for all workers was 60.4% for the third straight month. It remained below its reading of 61.1% in February 2020 just prior to the pandemic.

The average duration of unemployment rose in September to 21.5 weeks from 20.4 weeks in the prior month, up from the 19.3-week low in February of this year. The median duration of unemployment rose to 9.2 weeks, up from the 8.1 week March low. It remained below the 19.9 high in June 2021.

The employment and earnings data are collected from surveys taken each month during the week containing the 12th day of the month. The labor market data are contained in Haver's USECON database. Detailed figures are in the EMPL and LABOR databases. The expectations figures are in the AS1REPNA database.