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- After faltering in August, headline payroll employment growth snapped back in September with the addition of 248,000 jobs. What’s more, the August figure was revised upward by 38,000 jobs.
- The unemployment rate eased to 5.9% as a result, the first time under 6.0% since July 2008. This figure is derived from a different survey, which queries households about their employment position. Consequently, non-payroll jobs are counted. This survey also measures labor participation, which is a gauge of the share of persons employed or actively looking for work and provides insight into discouraged workers and underutilization. This measure slipped further to 62.7% in September. Studies suggest that the low participation could reflect an increase in early retirements, while others argue it is suggestive of slack in the labor market.
- The strongest gains in employment came in the professional and business services, retail trade, and health care sectors.
- Wage growth was revised slightly upward in August, while the September reading was flat. Tepid wage growth is a negative for home purchase affordability and could act as a headwind for price growth. However limited wage growth removes the specter of inflation giving the Fed more room to maneuver without raising mortgage rates, a more immediate threat to affordability. Prices will still grow given an expanding buyer base relative to limited supply.
- This month’s reading of the labor market was a strong reversion back to the recent storyline of steady economic expansion. Modest wage growth and labor underutilization could create an opening for improved employment and confidence without a near-term spike in mortgage rates as many have feared. However, recent weakness in manufacturing figures and consumer confidence suggest softening in October.
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