Today’s job numbers from the Bureau of Labor Statistics showed that 114,000 jobs were added in September and the unemployment rate dropped significantly to 7.8 percent. This is one of those months where the two main surveys are telling somewhat different stories. The establishment survey (which provides the job count) shows the kind of steady but modest growth we’ve been seeing for the last two-and-a-half years – job growth that is just enough to keep up with growth in the potential workforce. On the other hand, the household survey (which provides the unemployment rate) was extremely positive, with a substantial drop (three-tenths of a percentage point) in the unemployment rate. Further good news: the drop in the unemployment rate was due to people getting jobs, not due to them leaving the labor force – the labor force participation rate increased one-tenth of a percentage point to 63.6 percent, and the share of working-age people with a job increased by four-tenths of a percentage point to 58.7 percent.
The rule of thumb when the two surveys tell different stories in the same month is to give much more weight to what the establishment survey says, given that the establishment survey has a much larger sample size and therefore less month-to-month variability. Nevertheless, the September household survey provides a reason to be a little more optimistic about job opportunities for American workers than we have been in recent months.
The 300,000 teacher gap
In September, public-sector employment increased by 10,000. However, over the last four years, it has declined by 572,000. With kids heading back to the classroom this fall, it’s worth considering how much of that drop has hit public schools. Around 40 percent of the decline in public sector employment over the last four years was in local government education, which is largely jobs in public K-12 education (the majority of which are teachers, but also teacher aides, librarians, guidance counselors, administrators, support staff, etc.). Furthermore, public K-12 enrollment increased by 0.8 percent over this period (using the enrollment growth rates found in Table 1 here). Just to keep up with this growth in the student population, employment in local public education should have grown at roughly the same rate, which would have meant adding around 62,000 jobs. As the figure shows, adding what was lost to what should have been added to keep up with the expanding student population, the total jobs gap in local public education as a result of the Great Recession and its aftermath is over 300,000. For more on the teacher gap, see this post.
Improvement in hours and wages
The length of the average workweek increased by one-tenth of an hour to 34.5, restoring hours to where they were earlier in the summer. Average hourly wages for all private-sector workers increased by 3.6 percent (annualized) in September, an improvement over recent months, bringing the annualized growth rate of the last three months to 1.4 percent. However, persistent high unemployment is exerting strong downward pressure on wages; the growth rate in recent months represents a substantial decline from the pre-recession rate of wage growth.
With the increase in both hours and hourly wages in September, average weekly earnings increased by 7.3 percent (annualized), also an improvement over recent months, bringing the three-month annualized growth rate of average weekly wages to 1.4 percent.
The “underemployment rate” (the U-6 measure of labor underutilization) is the BLS’s most comprehensive measure of labor market slack. It includes not just the officially unemployed, but also the marginally attached (jobless workers who want a job and are available to work but have given up actively seeking work) and people who want full-time jobs but have had to settle for part-time work. Unlike the unemployment rate, which saw a significant decline in September, the underemployment rate held steady at 14.7 percent in September. This difference was due primarily to a 582,000 increase in the number of “involuntarily” part-time workers, now at 8.6 million. There is a great deal of volatility in the involuntarily part-time series so it’s important not to make too much of a one-month increase, but one thing that can be said is that there has been very little improvement in the number of involuntarily part-time workers since it first hit nine million in the spring of 2009. Racial and ethnic minorities have been particularly hard hit by underemployment.
Private sector industry breakdowns
Manufacturing lost 16,000 jobs in September, after losing 22,000 in August, not welcome news. Employment in temporary help services was also negative, declining by 2,000 in September after a flat August. Construction added 5,000 jobs, after adding 3,000 per month for the prior three months, and retail added 9,000 jobs, after gaining 1,000 per month on average for the prior three months.
Health care was the strong point in September, adding 44,000 jobs after adding 16,000 on average for the prior three months. Restaurants and bars also showed ongoing strong job growth, adding 16,000 jobs in September, though this was somewhat lower than the industry’s 22,000 average increase of the prior three months.
- Unemployment in September was 8.7 percent for those age 25 and older with a high school degree but no additional education, and 4.1 percent for those age 25 and older with a college degree or more. Among workers younger than age 25 who are not enrolled in school, unemployment over the last 12 months averaged 20.7 percent for those with a high school degree and 7.9 percent for those with a college degree (annual averages are used here since seasonally adjusted data are not available for workers under age 25 by education). These numbers show that young workers have been particularly hard hit by unemployment. They also show that workers with higher levels of education have lower unemployment. However, workers at all levels of education have seen their unemployment rates roughly double since 2007, showing that our persistent high unemployment problem is not a “skills” problem, since demand for workers has dropped at all levels of education.
- Racial and ethnic minorities continue to be hit particularly hard by unemployment. Unemployment in September was 13.4 percent for African American workers, 9.9 percent for Hispanic workers, and 7.0 percent for white workers, (up 4.4, 3.6, and 2.6 percentage points, respectively, since the start of the recession).
- Men saw a much larger increase in unemployment than women did during the recession, but have seen stronger improvements in the recovery. The unemployment rate reached its pre-recession low in late 2006 and early 2007, at 4.4 percent for men and 4.3 percent for women. Male unemployment peaked at 11.2 percent in October 2009 and has since fallen to 8.0 percent. Female unemployment continued to rise for about another year, when it peaked at 9.0 percent in November 2010, and has since fallen to 7.5 percent.
The labor market still has a deficit of 9.2 million jobs, including, as described above, a gap of over 300,000 teachers. The ongoing loss of public sector jobs is holding back job growth throughout the economy. Congress should provide aid to state and local governments to keep austerity in that sector from continuing to weigh down the recovery.
— Research assistance provided by Nicholas Finio, Natalie Sabadish, and Hilary Wething