Employment Growth

  • 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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