Nonfarm Employment Levels Up Despite Short-Term Headwinds
|Nonfarm payrolls increased by 661,000 jobs in September as the economy continued to bounce back from the lows of the pandemic registered earlier this year. The decelerating pace of the recovery is clear, and the net new jobs reported was well below market consensus. According to the Bureau of Labor Statistics (BLS), the net positive job growth helped cut the unemployment rate by half a percentage point to 7.9%, more than double pre-pandemic levels but down by nearly half since April.
September’s headline figure represents the third consecutive month of slowing growth, and two short-term headwinds weighed on job creation last month. First, the Census has started to ramp down operations and staffing levels. Second, state and local education employment experienced a below-average seasonal increase in job totals.
Despite the net job gains, some unemployed workers appear to be losing hope for new work as the labor force declined by 695,000 people last month. At 61.4%, the labor force participation rate remains 2.0 percentage points lower than in February. As the ranks of people unemployed longer than six months is likely to increase in coming months, the labor force participation rate is likely to decrease accordingly. Such a decline could cause the unemployment rate to appear to drop as BLS includes only those actively seeking work in the calculation.
Another area of concern moving forward centers on large-scale layoffs that could slow the recovery. Challenger reported mass layoffs in September covering nearly 120,000 workers, a 2.6% increase over the month prior. Still to come, Disney announced last week that its theme parks division will let go 28,000 workers, many of them part-time employees, and American Airlines and United plan to cut a combined 32,000 jobs now that federal aid for airlines has ended.
In contrast, employment at small businesses appears to be stabilizing, according to the Small Business Employment Watch. Jointly developed by Paychex and IHS Markit, the index held steady in September after declining the three preceding months. Financial activities and trade and transportation demonstrated the largest gains.
Monthly Change in Nonfarm Payrolls by Sector
Sun Belt Markets Leading the Way in Multifamily Rent GrowthA review of preliminary third quarter market data from Axiometrics and CoStar shows Sun Belt metros have achieved some of the strongest rent growth among major markets over the past year. Sun Belt markets make up eight of Axiometrics’ top ten markets and nine of CoStar’s top ten, although the rankings and rent growth figures vary somewhat in part because of different survey sets. Many Sun Belt markets benefit from labor sectors that have proven more resilient to both the pandemic as well as restrictions on business activity. Both Riverside and Jacksonville, for example, count among major industrial and distribution hubs, while Sacramento and Virginia Beach each have a large government presence. These metros also offer more affordability compared to several coastal markets that have experienced significant distress during the pandemic.
Year-on-Year Multifamily Rent Growth (Ranked by CoStar Figures)
Consumer Finances and Sentiment Trending Upward
|U.S. personal income was up 4.7% YOY in August despite the expiration of expanded unemployment benefits as employee compensation improved for the fourth consecutive month. Worker wages and benefits increased 1.2% during the month as businesses across a range of sectors ramped up staffing levels. The Lost Wages Assistance program, which temporarily offers an extra $300 a week to laid off workers, also helped offset the expiration of pandemic-related jobless benefits worth $600 a week.
The encouraging income trends have buoyed consumer confidence, which is translating into stronger economic activity. The University of Michigan, Conference Board, and Bloomberg consumer sentiment indices all registered sizeable improvements last month to the highest levels since the start of the pandemic. Consumer spending increased 5.4 percentage points from the start of August through September 20th to only 3.8% below January averages, according to Opportunity Insights.
The steady income figures have also allowed consumers to stabilize their financial situations. Banks report that both net losses and 30- and 60-day delinquency rates on credit cards have declined compared to pre-pandemic averages, according to Bloomberg data. And at 14.1%, the personal savings rate in August stood at a historically high level, suggesting many households may be better equipped to navigate financial emergencies should the economic recovery prove prolonged.
Consumer Sentiment Indices
The Weekly Briefing - October 5th, 2020
The Weekly Briefing – October 5th, 2020:
In This Week’s Brief:
- Nonfarm Employment Levels Up Despite Short-Term Headwinds
- Sun Belt Markets Leading the Way in Multifamily Rent Growth
- Consumer Finances and Sentiment Trending Upward