Still a Long Way to Go: September 28 – October 2

The labor market only has recovered half of what it lost earlier this spring. Here are the five things we learned from U.S. economic data released during the week ending October 2.


Job creation slowed in September. The Bureau of Labor Statistics estimates nonfarm payrolls expanded by a seasonally adjusted 661,000 during the month, down sharply from job gains over the prior four months. Since May, nonfarm employers have added a net 11.4 million workers, just over half of the 22.2 million jobs shed at the start of the pandemic. As a matter of perspective, the size of payrolls in September matched that of only the summer of 2015(!). Private-sector employers added 877,000 workers (down from 1.022 million in August), split between 93,000 in the goods-producing sector and 784,000 in the service sector. Industries adding the most workers in September were leisure/hospitality (+318,000), retail (+142,400), health care/social assistance (+107,700), professional/business services (+89,000), transportation/warehousing (+73,600), and manufacturing (+66,000). Government employment shrank by 216,000, as local government education payrolls narrowed by 231,100 workers (reflecting the shift to virtual education in many jurisdictions).

The separate household survey finds the unemployment rate falling by a half percentage point to 7.9 percent. However, much of this decline represents people departing the labor force, which contracted by 695,000, reflecting both discouraged workers by their prospects and people shifting to a caretaking role at home. The labor force participation rate fell by 3/10ths of a percentage point to 61.4 percent—the same measure for adults aged 25 to 54 fell by a half-point to 80.9 percent. The median length of unemployment bloomed to 17.8 weeks, with 39.0 percent of unemployed people being out of work for between 15 to 26 weeks and 19.1 percent jobless for more at least 27 weeks. The median length of unemployment in February was 9.1 weeks. The count of part-time workers seeking full-time hours plummeted by 1.272 million to 6.300 million (February 2020: 4.318 million).

Personal spending on services grew but fell for goods in August. Real Personal Consumption Expenditures (PCE) increased 0.7 percent during the month, its smallest increase over the past four months for the Bureau of Economic Analysis measure. Real spending on goods slipped 0.2 percent, with expenditures on durable goods holding steady but on nondurables falling 0.3 percent (but by declining food/beverage purchases for off-premise consumption). Spending on services rose 1.1 percent, boosted by gains in food services, accommodations, and hospital/outpatient services. Real disposable income fell 3.5 percent, resulting from the termination of the supplemental COVID unemployment benefits program. As a result, the savings rate fell by 3.6 percentage points to a still-high 14.1 percent.

Factory orders grew modestly in August. The Census Bureau reports that new orders for manufactured goods increased 0.7 percent during the month to a seasonally adjusted $470.1 billion. Orders had risen 6.4 percent and 6.5 percent in June and July, respectively. Orders over the first eight months of 2020—$3.592 trillion—were 9.2 percent behind the pace of the same period in 2019. Durable goods orders advanced 0.5 percent, including a 0.4 percent gain for transportation goods. Nondurable goods orders gained 0.8 percent. Shipments improved for a fourth straight month, growing 0.3 percent to $481.3 billion after July’s 4.7 percent advance. Shipments over the first eight months of 2020 totaled $3.698 trillion, 7.9 percent behind last year’s pace. Unfilled orders narrowed 0.6 percent to $1.079 trillion, while inventories expanded by less than 0.1 percent to $686.6 billion.

Manufacturing expanded again in September. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, lost 6/10ths of a point during the month to a reading of 55.4. September was the fourth consecutive month with a PMI above a reading of 50.0, indicating a growing manufacturing sector. Losing pace during the month were indicators for new orders and production while those for employment and inventories improved from their August marks. Fourteen of 18-tracked industries reported growth during the month, led by paper products, wood products, and food/beverages. The press release said that “the manufacturing community as a whole has learned to conduct business effectively and deal with the variables imposed by the COVID-19 pandemic.”

Consumer sentiment firmed a bit in September. The Conference Board’s Consumer Confidence Index rose by 15.5 points to a seasonally adjusted 101.8 (1985=100). While its best reading since March, the headline index remained well below its year-ago mark of 125.1. The current conditions index jumped by 12.7 points to 98.5 and the expectations index surged by 17.4 points to 104.0. 18.3 percent of survey respondents saw current economic conditions as “good,” while 37.4 percent saw them as “bad.”  Similarly, 22.9 percent of respondents characterized jobs as being “plentiful,” while 20.0 percent saw them as “hard to get.” The press release said the results suggest a “great optimism” that “may help keep spending from slowing further in the months ahead.”

The Index of Consumer Sentiment from the University of Michigan added 6.3 points to a seasonally adjusted 80.4 (1966Q1=100). Like above, the measure was at its highest point since March but was off 12.8 points from a year earlier. The current conditions index added 4.9 points to 87.8 (September 2019: 108.5), while the expectations index advanced by 7.1 points to 75.6 (September 2019: 83.4). The press release noted a “significant increase” in respondents who “expected a reestablishment of good times financially in the overall economy,” but also stated that higher-income households were much more likely to be optimistic than other respondents.

Other U.S. economic data released over the past week:

  • Jobless Claims (Week ending September 26, First-Time Claims, seasonally adjusted): 837,000 (-36,000 vs. the previous week, +619,000 vs. the same week a year earlier). 4-week moving average: 867,250 (+307.2% vs. the same week a year earlier).
  • Gross Domestic Product (Q2 2020—3rd Estimate, Real GDP, seasonally adjusted annualized rate): -31.4% (vs. Q2 2020—2nd Estimate: -31.7 percent; Q1 2020: -5.0%; Q2 2019: +1.5%).
  • Construction Spending (August 2020, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.413 trillion (+1.4% vs. July 2020, +2.5% vs. August 2019).
  • Agricultural Prices (August 2020, Prices Received by Farmers): +1.0% vs. July 2020, -3.5% vs. August 2019.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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