- Payrolls grew by 263,000 jobs in September, a slower speed than earlier this year but still a rapid pace. Leisure and hospitality payroll growth continues to power forward, but jobs in the sector are still 6.7% below February 2020 level.
- Unemployment declined to 3.5%, due to a drop in labor force participation. The share of people with a job held steady as job-finding rates for the unemployed dropped but rates of job loss remained low.
The US labor market continues to decelerate, but there are no signs that it’s stalling out. Payroll growth is no longer at the jet speed we saw last year, but employment is still growing quickly. Adding jobs at this pace is still more than sufficient to pull workers back into the labor force. There are signs that the pace at which unemployed workers can find jobs is declining, but the rate at which people are losing jobs is still low. There might be some turbulence ahead, but the labor market continues to cruise.
The current three-month average in payroll gains is more than twice as fast as the average pace in 2019 when the unemployment rate was at a similar level. This current average pace of 372,000 is much faster than the number needed to hold the unemployment rate constant, which is closer to 70,000 to 100,000 jobs a month. Within that topline number, the decline in Transportation and Warehousing was notable, as the sector has been a pandemic-era winner.
The unemployment rate did decline, but the share of workers with a job held steady. In fact, the share of prime-age workers (those ages 25 to 54) fell in September. This important metric is tantalizingly close to its February 2020 level but hasn’t gotten there yet. The stall out in employment growth was driven more by a slowdown in unemployed workers getting jobs than a rise in employed workers entering unemployment. The widely-feared spike in layoffs has yet to arrive.
The labor market is coming down from high-flying speeds and, at least so far, the descent has been relatively smooth. Payrolls are growing, but not at a breakneck pace. Unemployment and joblessness remain low while job openings are declining. Not every item on the “soft landing” checklist has been ticked off, but many indicators are looking good. Things might be bumpy in the months ahead, but for now, the seat belt sign is off.