What to Watch on Jobs Day: Anticipated distortions to payroll employment and wage growth

The uneasy question on everyone’s lips these days seems to be about when the next recession is coming. Ironically, every month that gets added to the longest economic recovery in modern history brings increasing scrutiny to even the slightest sign of a downturn. As we turn our attention to the Bureau of Labor Statistics (BLS) October Employment Situation Report this week, two of those signs—a drop in payroll employment and a slowdown in nominal wage growth—are deserving of deeper exploration.

First, we expect some noise in the October payroll estimates due to two temporary, but fully anticipated and measurable effects. According to the BLS CES Strike Report, October payroll estimates will be reduced by 46,000 because of the General Motors (GM) strike, which started in mid-September 2019 and ended last Friday. What that means, in practical terms, is that private sector payroll employment for the month of October, in the absence of the GM strike, was actually 46,000 higher than what will be reported. Another event that could have some effect on the number of jobs added in October will be temporary hiring for the Decennial Census, which could potentially inflate the number of public sector jobs.

While the October jobs report may not be the most straightforward indicator of current job growth patterns, in August BLS reported a major downward revision in the number of jobs added over the past year. Specifically, the release of the preliminary estimate of its benchmark revision to payroll employment revealed that there were a half million fewer jobs created between April 2018 and March 2019 than was originally reported. Given weaker private sector employment growth in September relative to the prior 3- to 6-month averages, we will be watching for whether October employment growth, net of the effects of the GM strike and Census hiring, is stronger or weaker than recent trends.

As noted by my colleague Elise Gould, the most troubling news from last month’s otherwise positive jobs report was that nominal wages rose 2.9% year-over-year in September. This rate of growth was slower than expected in an economy for which the unemployment rate has been at (or below) 4.0% for the last 19 months. This Friday, we will be watching to see whether the low of 2.9% was a blip, or part of the longer term pattern of deceleration experienced in the first half of 2019.

Nominal Wage Tracker

Nominal wage growth has been far below target in the recovery: Year-over-year change in private-sector nominal average hourly earnings, 2007–2019

Date All nonfarm employees Production/nonsupervisory workers
Mar-2007 3.44% 4.11%
Apr-2007 3.08% 3.79%
May-2007 3.48% 4.14%
Jun-2007 3.56% 4.19%
Jul-2007 3.25% 4.05%
Aug-2007 3.35% 3.98%
Sep-2007 3.14% 4.09%
Oct-2007 3.08% 3.78%
Nov-2007 3.07% 3.83%
Dec-2007 2.97% 3.81%
Jan-2008 2.91% 3.80%
Feb-2008 2.80% 3.79%
Mar-2008 3.04% 3.83%
Apr-2008 2.84% 3.76%
May-2008 3.07% 3.69%
Jun-2008 2.77% 3.56%
Jul-2008 3.05% 3.67%
Aug-2008 3.33% 3.89%
Sep-2008 3.23% 3.64%
Oct-2008 3.27% 3.81%
Nov-2008 3.60% 3.91%
Dec-2008 3.59% 3.90%
Jan-2009 3.63% 3.72%
Feb-2009 3.43% 3.65%
Mar-2009 3.28% 3.47%
Apr-2009 3.42% 3.35%
May-2009 2.93% 3.06%
Jun-2009 2.83% 2.88%
Jul-2009 2.69% 2.71%
Aug-2009 2.44% 2.70%
Sep-2009 2.44% 2.75%
Oct-2009 2.53% 2.68%
Nov-2009 2.19% 2.67%
Dec-2009 1.91% 2.50%
Jan-2010 2.05% 2.66%
Feb-2010 2.09% 2.55%
Mar-2010 1.81% 2.27%
Apr-2010 1.76% 2.38%
May-2010 1.90% 2.59%
Jun-2010 1.76% 2.53%
Jul-2010 1.85% 2.42%
Aug-2010 1.75% 2.36%
Sep-2010 1.84% 2.19%
Oct-2010 1.93% 2.45%
Nov-2010 1.65% 2.13%
Dec-2010 1.79% 2.02%
Jan-2011 1.92% 2.28%
Feb-2011 1.87% 2.06%
Mar-2011 1.87% 2.06%
Apr-2011 1.91% 2.16%
May-2011 2.04% 2.10%
Jun-2011 2.13% 2.05%
Jul-2011 2.30% 2.26%
Aug-2011 1.99% 1.94%
Sep-2011 1.94% 1.99%
Oct-2011 2.07% 1.88%
Nov-2011 2.02% 1.82%
Dec-2011 1.98% 1.77%
Jan-2012 1.71% 1.35%
Feb-2012 1.79% 1.45%
Mar-2012 2.10% 1.76%
Apr-2012 2.09% 1.65%
May-2012 1.78% 1.39%
Jun-2012 2.00% 1.54%
Jul-2012 1.77% 1.44%
Aug-2012 1.86% 1.33%
Sep-2012 2.03% 1.54%
Oct-2012 1.51% 1.18%
Nov-2012 1.90% 1.43%
Dec-2012 2.24% 1.69%
Jan-2013 2.24% 1.84%
Feb-2013 2.15% 2.04%
Mar-2013 1.93% 1.88%
Apr-2013 2.05% 1.83%
May-2013 2.14% 1.93%
Jun-2013 2.13% 2.03%
Jul-2013 2.00% 1.97%
Aug-2013 2.26% 2.23%
Sep-2013 2.04% 2.22%
Oct-2013 2.25% 2.32%
Nov-2013 2.24% 2.37%
Dec-2013 1.85% 2.21%
Jan-2014 1.89% 2.31%
Feb-2014 2.27% 2.55%
Mar-2014 2.10% 2.30%
Apr-2014 1.93% 2.29%
May-2014 2.09% 2.44%
Jun-2014 1.96% 2.24%
Jul-2014 2.04% 2.33%
Aug-2014 2.16% 2.43%
Sep-2014 2.08% 2.22%
Oct-2014 2.03% 2.27%
Nov-2014 2.03% 2.22%
Dec-2014 1.99% 1.92%
Jan-2015 2.19% 2.01%
Feb-2015 1.93% 1.66%
Mar-2015 2.22% 1.95%
Apr-2015 2.26% 2.00%
May-2015 2.34% 2.14%
Jun-2015 2.25% 2.14%
Jul-2015 2.17% 2.04%
Aug-2015 2.20% 1.98%
Sep-2015 2.28% 2.08%
Oct-2015 2.52% 2.37%
Nov-2015 2.43% 2.12%
Dec-2015 2.47% 2.51%
Jan-2016 2.55% 2.40%
Feb-2016 2.42% 2.50%
Mar-2016 2.45% 2.49%
Apr-2016 2.61% 2.58%
May-2016 2.40% 2.33%
Jun-2016 2.60% 2.48%
Jul-2016 2.76% 2.62%
Aug-2016 2.55% 2.51%
Sep-2016 2.63% 2.46%
Oct-2016 2.66% 2.41%
Nov-2016 2.61% 2.50%
Dec-2016 2.65% 2.50%
Jan-2017 2.40% 2.39%
Feb-2017 2.72% 2.34%
Mar-2017 2.55% 2.29%
Apr-2017 2.47% 2.24%
May-2017 2.54% 2.33%
Jun-2017 2.50% 2.32%
Jul-2017 2.57% 2.32%
Aug-2017 2.57% 2.31%
Sep-2017 2.83% 2.59%
Oct-2017 2.32% 2.16%
Nov-2017 2.47% 2.35%
Dec-2017 2.74% 2.48%
Jan-2018 2.81% 2.47%
Feb-2018 2.57% 2.47%
Mar-2018 2.80% 2.74%
Apr-2018 2.79% 2.78%
May-2018 2.94% 2.91%
Jun-2018 2.93% 2.91%
Jul-2018 2.85% 2.85%
Aug-2018 3.18% 3.12%
Sep-2018 2.98% 3.02%
Oct-2018 3.32% 3.25%
Nov-2018 3.31% 3.37%
Dec-2018 3.34% 3.50%
Jan-2019 3.18% 3.35%
Feb-2019 3.40% 3.44%
Mar-2019 3.24% 3.38%
Apr-2019 3.16% 3.33%
May-2019 3.08% 3.36%
Jun-2019 3.18% 3.35%
Jul-2019 3.25% 3.52%
Aug-2019 3.23% 3.51%
Sep-2019 3.00% 3.50%
Oct-2019 3.03% 3.49%
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Nominal wage growth consistent with the Federal Reserve Board’s 2 percent inflation target, 1.5 percent productivity growth, and a stable labor share of income

Source: EPI analysis of Bureau of Labor Statistics Current Employment Statistics public data series

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Nominal wage growth has been below the rate of growth that is consistent with Federal Reserve Board’s 2 percent inflation target throughout the recovery. The Fed’s decision to lower interest rates on Wednesday is the safest decision they could make to extend the recovery.