October 2021 Employment Report

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The Bureau of Labor Statistics‘ (BLS) establishment survey showed non-farm employers added “robust” 531,000 jobs in October, far better than the 450,000 expected). Also, August and September employment changes were revised up by a combined 235,000 (August: +117,000; September: 118,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) edged down by 0.2 percentage point, to 4.6%, as the number of people who found work (+359,000) exceeded growth in the civilian labor force (+104,000). 

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Observations from the employment reports include:

* The establishment (+531,000 jobs) and household surveys (+359,000 employed) were better correlated than has often been the case.

* Goods-producing industries gained a respectable 108,000 jobs; service-providers: +423,000. Job growth was widespread, with notable job gains occurring in leisure and hospitality (+164,000), in professional and business services (+100,000), in manufacturing (+60,000), and in transportation and warehousing (+54,400). Employment in public education declined (-64,900), although that estimate is clouded by the repeated closing and reopening of schools over the past year, which has confounded the BLS’s seasonal adjustment for education.

As mentioned above, manufacturing added 60,000 jobs. That result is consistent with the change in the Institute for Supply Management‘s (ISM) manufacturing employment sub-index, which expanded more rapidly in October. Wood Products employment rose by 1,400 (ISM fell); Paper and Paper Products: +2,200 (ISM fell); Construction: +44,000 (ISM rose).

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* The number of employment-age persons not in the labor force rose modestly (+38,000) to 100.5 million. Nonetheless, the employment-population ratio (EPR) edged up fractionally to 58.8%; i.e., nearly six out of 10 in the employment-age population are presently employed. 

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* Because the civilian labor force expanded by 104,000 in October (only partly offsetting September’s shrinkage of 183,000), the labor force participation rate was unchanged at 61.6%. Average hourly earnings of all private employees increased by $0.11 (to $30.96), and the year-over-year increase rose to +4.9%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.10, to $26.26 (+5.8% YoY). Since the average workweek for all employees on private nonfarm payrolls contracted (0.1 hour) to 34.7 hours, average weekly earnings inched up (+$0.73) to $1,074.31 (+4.5% YoY). With the consumer price index running at an annual rate of +5.4% in September, even those who are employed are -- on average -- only barely keeping up with the official inflation rate.

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* Full-time jobs advanced (+279,000) to 128.3 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- retreated by 45,000, whereas those working part time for non-economic reasons declined by 68,000; multiple-job holders also fell by 67,000.

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For a “sanity test” of the job numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in October dropped by $12.7 billion, to $220.3 billion (-5.5% MoM; +18.0% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year; the average of the three months ending October was 22.4% above the year-earlier average.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.