September jobs beat estimates, but unemployment rises to 4.4%

We are finally back. We got the September jobs report, which beat estimates by creating 119,000 jobs, but the unemployment rate ticked up to 4.4%. The year-to-date job creation levels — while meeting my estimate of job growth of 76,000 once adjusted for labor force growth — are still the lowest in the 21st century outside a recession. However, over the last five months, growth has been even softer at only 39,000 per month.

The current data shows that the labor market is getting softer but not breaking yet. Let’s take a look at the numbers.

From BLS: Total nonfarm payroll employment edged up by 119,000 in September but has shown little change since April, the U.S. Bureau of Labor Statistics reported today. The unemployment rate, at 4.4 percent, changed little in September. Employment continued to trend up in health care, food services, drinking places, and social assistance. Job losses occurred in transportation and warehousing and in the federal government.

We saw growth in construction jobs, but we lost manufacturing jobs again. The usual sectors that create most of the jobs stayed true in this report, and yes, we did have a negative 33,000 in revisions in the previous months. The government sector provided job growth in this report, which got us over the 100,000 level with 22,000 jobs created this month. Remember that the government shutdown started on Oct. 1 so that doesn’t have any impact on this report.

Manufacturing jobs

This report shows that manufacturing jobs have been lost again and have continued their slow decline since late 2022. Not a lot of people know this, but the boom in manufacturing jobs from 2020 to 2022 has started to reverse slowly. Here is a longer-term look at the history of manufacturing jobs.

In a shorter-term chart, you can see the struggles in this sector, with many revisions in place. Here, we peaked in jobs around February of 2023 and slowly moved lower. We are below pre-COVID-19 levels.

Back in December of 2016, I wrote about the manufacturing labor market and why it was going to be a hard sector to grow jobs at scale, which you can read here.

Construction labor

As mortgage rates have fallen toward 6%, builders’ confidence has risen, new home sales have risen and the decline in this labor pool, which has been key to my economic work tied to economic cycles, has also risen. We still have a lot of work to do if we want to grow this labor pool again.

Specialty contract labor is still in a down trend. With Home Depot warning this week, it doesn’t look positive for the remodeling sector, and this labor sector is still falling.

Unemployment rate

The unemployment rate in this report did rise to a level that concerned the Fed last year. As the labor force grew, so did the unemployment rate, despite the creation of 119,000 jobs. The labor force grew faster than the employment-to-population ratio, which can explain the uptick in the unemployment rate.

The job market is clearly slowing down this year, but it hasn’t collapsed yet; jobless claims haven’t surged, as they typically do in every recession post-WWII. We received that data today. When jobless claims on the 4-week moving average head toward 323,000, the labor market will be truly breaking.

Conclusion

The labor market remains in a situation I have discussed for several months: it is softening but not collapsing. We are likely to see the lowest job growth in the 21st century outside of a recession, and this is not solely due to a slowdown in labor force growth.

On a positive note, lower mortgage rates are having an effect, boosting construction labor, similar to what happened in 2023 after four months of decline. All we need is the Federal Reserve to get rates to neutral policy and we can make some positive moves in the labor market.