September Hiring Well Under Expectations

Overall payroll gains set back by public-sector job losses

Roy Maurer By Roy Maurer October 8, 2021
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U.S. employers added a disappointing 194,000 new jobs in September, much less than the 500,000 jobs forecast by economists, according to the latest employment report from the Bureau of Labor Statistics (BLS).

U.S. job growth fell to the slowest pace of the year, although the net total was primarily held back by a sharp drop in public-sector employment, mostly teachers. The unemployment rate fell to 4.8 percent from 5.2 percent in August, but the decrease is more discouraging news—it's largely due to many workers giving up on finding a job.

It was the second month in a row of disappointing job growth after blockbuster reports in June and July. The spread of the delta variant, an especially contagious strain of COVID-19, likely delayed would-be applicants late in the summer and is still an obstacle to job growth, despite many companies being desperate to hire, economists said.

"While today's numbers were much lower than anticipated, we need to remember it's a snapshot in time and in September the delta variant and health concerns remained," said Becky Frankiewicz, president of ManpowerGroup North America. "Demand is there yet talent shortages continue—we have fewer workers out there and people are participating less. Today there are 11 million open jobs and nearly 8 million people unemployed."

Glassdoor Senior Economist Daniel Zhao pointed out that employment is still nearly 5 million below pre-pandemic levels and at September's pace, it would take over two years to return to where things were before the health crisis.

The report is deflating, said Nick Bunker, an economist at the Indeed Hiring Lab. "The hope was that [the poor employment gains in] August was an anomaly… but the reality is that we are still in a pandemic. Demand for workers is strong and millions of people want to return to work, but employment growth has yet to find its footing. Hopefully the current decline in COVID case counts continues. That seems to be the only way out of our current situation."

Public-Sector Drag

Private-sector employment growth in September was actually not as bad as it would seem—payrolls increased by 317,000—but the loss of government jobs, especially in education, brought the total down.

Local government school districts lost 144,000 jobs last month, with a further 17,000 job losses at the state level. Most back-to-school hiring typically occurs in September, but hiring this year was lower than usual, resulting in last month's decline. The seasonally adjusted numbers show that schools didn't add the number of teachers at the beginning of the academic year that they normally do, while pandemic-related staffing fluctuations in public and private education have distorted the normal seasonal hiring and layoff patterns.

"In a normal year, 1.2 million people return to work in public schools between August and September," said Julia Pollak, chief economist at ZipRecruiter. "This year, payrolls only grew by 1 million—a far cry from the 2.2 million required to get back to normal pre-COVID staffing levels."

Bar and Restaurant Hiring Loses Steam

Leisure and hospitality employers again led job creation, adding 74,000 positions, as the unemployment rate for the sector fell to 7.7 percent from 9.1 percent. But growth in the sector—the hardest hit by the pandemic and driving the recovery this year—has slowed down since August.

"Though the sector was adding over 400,000 jobs a few months ago, employment is still down from its pre-pandemic level," Bunker said. "Getting the pandemic behind us will help the economy overall, but its impact will be most apparent in leisure and hospitality."

Employment in leisure and hospitality is down by 1.6 million since February 2020.

Job gains were spread across a variety of other sectors: Professional and business services (60,000), retail (56,000), transportation and warehousing (47,000), information (32,000) manufacturing (26,000) and construction (22,000).

Employment in health care fell in September by 18,000 jobs. Health care jobs are down by 524,000 since February 2020, with nursing and residential care facilities accounting for about 80 percent of the loss.

Unemployment Ticks Down

The number of people classified as unemployed fell by 710,000 in September to 7.7 million and the unemployment rate dropped to a new pandemic-era low of 4.8 percent.

"The unemployment rate did drop, but that decline did not necessarily translate into more people finding a job," Bunker said. "The employment-to-population ratio only increased by 0.2 points while the labor force participation rate dropped by 0.1 points. The situation was more disappointing for prime-age workers—those ages 25 to 54—who did not see any increase in their employment rate."

Richard Wahlquist, president and chief executive officer of the American Staffing Association, based in Alexandria, Va., said that the decrease in unemployment was due in large measure to 183,000 workers leaving the workforce in September. "If you look at total U6 unemployment [which includes the unemployed, underemployed and those discouraged from looking for work] the rate is closer to 8.6 percent," he said.

The labor-force participation rate—the share of workers with a job or actively looking for one—fell to 61.6 percent in September, down from its pre-pandemic level of 63.3 percent in February 2020.

"The labor force participation rate's drop shows a continued hesitancy of workers to return to the workplace," Wahlquist said.

The female labor force participation rate fell from 56.2 percent to 55.9 percent, even though the reopening of most schools for in-person education should have allowed parents—and particularly mothers—to return to the labor force, Pollak said.

Wages Rise

Average hourly earnings for all private-sector employees rose by 19 cents to $30.85 in September, following increases in the prior five months.

"With vacancies continuing to grow but participation staying flat, the job market gets ever tighter, putting upward pressure on wages," Pollak said. "Average hourly earnings are up 4.6 percent year-over-year overall, 5.8 percent in education and health services, 6 percent in transportation and warehousing, and 10.8 percent in leisure and hospitality." 

Signs for Optimism

Andrew Hunter, co-founder of London-based job search engine Adzuna, said that although the jobs report came in below expectations, job openings have remained at record high levels since May. "We've also seen encouraging growth in jobs for graduates, and we're seeing the start of a holiday hiring boom with large employers like UPS and the U.S. Postal Service advertising for tens of thousands of seasonal roles," he said.

He added that consumer spending ticked higher in August, suggesting that the summer slowdown caused by the delta variant may be coming to an end.

War for Talent

Employers are working to do everything they can to attract and retain talent, Wahlquist said. "At the same time, we are in the midst of a seismic shift in attitudes and preferences about work, and the strong desire on the part of workers for more flexible, or hybrid, work schedules."

Looking ahead, Wahlquist said that employers will have to be much more empathetic and supportive when it comes to the health, safety, and family concerns of workers looking to reenter the workforce. There is also going to need to be much more investment in workforce development, including upskilling and reskilling employees to help them future-proof their careers, he said.

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