Credit Union Economists See Hope in Weak Jobs Report

Despite Friday’s weak jobs report, economists at CUNA, NAFCU and the Mortgage Bankers Association saw trends that show economic strength.

The U.S. Bureau of Labor Statistics’ establishment report showed the nation gained 194,000 non-farm jobs from August to September after seasonal adjustments. August’s gain was revised upward to 366,000 jobs from the previously reported 235,000 jobs.

The BLS’ household survey showed the seasonally adjusted unemployment rate was 4.8% in September, down from 5.2% in August and 7.8% in September 2020. The rate dropped for all age, race and ethnic groups, except teenagers.

“Payroll gains disappointed in September, failing to hit the 200,000 mark for the first time in the calendar year,” NAFCU Chief Economist Curt Long said.

CUNA Senior Economist Dawit Kebede said the economy has shown signs of improved economic activity even after August’s surge in COVID-19 cases from the Delta variant.

“The September jobs report is weaker than expected, but the good news is that while hiring has remained stagnant, the unemployment rate declined to 4.8%,” Kebede said. “Small employment gains in the leisure and hospitality industry show, despite the declining trend of the Delta virus, people are still reluctant to resume in-person activities.”

Mike Fratantoni, senior economist for the Mortgage Bankers Association, said strong housing demand will be supported by the continuing drop in jobless rates and the rise in wages.

“With 7.7 million people unemployed and looking for work, and a record 10.9 million job openings, we expect the unemployment rate will continue to drop over the next year,” Fratantoni said. “It was also positive to see the number of long-term unemployed fall by almost 500,000 last month.”

Long cited other promising indicators in the report:

• Weakness was concentrated in local education, “which is likely due to faulty seasonal adjustments.”
• Restaurant and retail employment rose even as COVID cases were cresting, “which bodes well for the October report.”
• Job gains in September were skewed toward full-time work, employees picked up more hours per week and wages rose 4.6% compared with a year earlier, “which should help blunt the impact of strong inflation.”

The BLS estimated that 7.7 million people were unemployed in September, down by 710,000 from August. The unemployment rate is still above its pre-pandemic level of 3.5% in February 2020, when 5.7 million people were unemployed.

The labor force participation rate dropped to 61.6% from 61.7% in August. It has hovered from 61.4% to 61.7% since June 2020, and is still down significantly from 63.3% in February 2020.

Fratantoni noted that the BLS’ household survey, which is used to calculate the unemployment rate, showed a seasonally adjusted job gain of 526,000 for September, much higher than the 194,000 job gain in the establishment survey and “indicating that the payroll survey may not be capturing all the recent employment gains in the economy.”

Fratantoni and Kebede said the falling unemployment rate might lead the Federal Reserve to start slowing down the purchase of Treasury and mortgage-backed securities.

“This will likely lead to modest increases in interest rates, putting additional pressure on housing affordability at a time home-price appreciation is still very high,” Fratantoni said.