Payrolls Miss Due To Hurricane But Revisions Surge; Unemployment At 48 Year Low

Ahead of today's jobs report, Nomura's Bilal Hafeez summarized the worst case scenario as "weak employment but high wage growth." And moments ago, we got one half of this scenario materializing when the BLS reported that in September only 134K jobs were added, well below the 185K expected (and certainly far lower than the 500K print implied by the latest ISM nonmfg report). This was the lowest print going back to March 2017 when only 50K jobs were added.

However before traders panic, note that this number was impacted by the Hurricane: the BLS noted that 299,000 people were not at work due to bad weather, which is over 200K higher than the 85K average for September.  Another 1,489K workers who usually work full-time could only work part-time due to the weather last month. This means that next month, the September job report will be revised sharply higher.

Meanwhile, offsetting the September weakness was the revision to the August jobs report, which was pushed higher from 201K to 270K, while July was revised from 147K to 165K. With these revisions, employment gains in July and August combined were 87,000 more than previously reported.

Even as payrolls missed, the unemployment rate ticked lower again, sliding from 3.9% to 3.7%, below the 3.8% consensus estimate, and the lowest print in 48 years. Also of note: the Unemployment rate has now hit the Fed's year end projection of 3.7%. The central bank recently estimated that unemployment would fall to 3.7% in the fourth quarter, which is where we are now, then decline to 3.5% in 2019 and remain there in 2020.

The more important average hourly earnings print came in line, with wages rising 0.3% on the month, and 2.8% on the year, both in line with expectations. According to Bloomberg, "the tick down in average hourly earnings suggests that wage pressures remain modest, a sign that firming inflationary pressures are likely still a way off."

Average hourly earnings of private-sector production and nonsupervisory employees increased by 6 cents to $22.81 in September.

The average workweek for all employees on private nonfarm payrolls remained unchanged at 34.5 hours in September. In manufacturing, the workweek edged down by 0.1 hour to 40.8 hours, and overtime edged down by 0.1 hour to 3.4 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.7 hours.

Other details from the report:

  • Broad U-6 measure of unemployment rose to 7.5% from 7.4%
  • Manufacturing payrolls added 18,000 (est. 15,000); construction added 23,000; government employment rose 13,000
  • Participation rate held at 62.7%
  • Monthly job gains averaged 190,000 over past three months

Breaking down the job gains:

Total nonfarm payroll employment rose by 134,000 in September, compared with an average monthly gain of 201,000 over the prior 12 months. In September, job gains occurred in professional and business services, in health care, and in transportation and warehousing.

  • Employment in professional and business services increased by 54,000 in September and has risen by 560,000 over the year.
  • Health care employment rose by 26,000 in September. Hospitals added 12,000 jobs, and employment in ambulatory health care services continued to trend up (+10,000). Over the year, health care employment has increased by 302,000.
  • In September, employment in transportation and warehousing rose by 24,000. Job gains occurred in warehousing and storage (+8,000) and in couriers and messengers (+5,000). Over the year, employment in transportation and warehousing has increased by 174,000.
  • Construction employment continued to trend up in September (+23,000). The industry has added 315,000 jobs over the past 12 months.
  • Employment in manufacturing continued to trend up in September (+18,000), reflecting a gain in durable goods industries. Over the year, manufacturing has added 278,000 jobs, with about four-fifths of the gain in the durable goods component.
  • Within mining, employment in support activities for mining rose by 6,000 over the month and by 53,000 over the year.
  • Employment in leisure and hospitality was little changed over the month (-17,000). Prior to September, employment in the industry had been on a modest upward trend. Some of the weakness in this industry in September may reflect the impact of Hurricane Florence.
  • Employment showed little or no change over the month in other major industries, including wholesale trade, retail trade, information, financial activities, and government.