HFF Analysis of the September 2018 BLS Employment Report

Friday, October 5, 2018

HFF is pleased to report on the latest employment expansion statistics from September 2018. Our research team analyzes trends and data to give readers a better view into the current state of the economy and how employment is being affected.

Employment Expansion

The U.S. added a lower than expected 134,000 jobs in September. Figures were revised upward to 270,000 in August and upward to 165,000 in July, a net upward revision of 87,000. It is speculated that lower than expected job growth may be in part attributable to recent weather.

Payroll creation has averaged around 200,000 since October 2010, marking the 96th month of consecutive growth. The period of monthly gains is around four years longer than the prior longest streak from 1986 to 1990.

Unemployment decreased 20 bps to 3.7 percent, the lowest level seen since December of 1969.  Unemployment has now been below five percent for 24 consecutive months.

Wage growth declined to 2.8 percent, falling slightly from its nine year high of 2.9 percent in August. The labor force continued to grow with 150,000 people joining in September 2018, while the labor participation rate stayed constant at 62.7 percent. The continued strong employment environment has economists keeping with their forecast of four rate hikes in 2018.

Average Monthly Payroll Creation Steady

The current expansion cycle is similar to the one from 1991 to 2000 and greater than the 2004 to 2007 expansionary period, but only after a significantly delayed recapture of the nation’s previous employment peak.  



Job Growth Steady and Strong in 2018

The U.S. created 2.18 million jobs in 2017 and 2.54 million in the last 12-month period. The last six years’ job growth is on par with the expansionary period from 1992 to 1995.



Job Growth Positive in Almost All Major Job Sectors

In 2017, the U.S. created 2.18 million jobs, but nearly 40 percent of private-sector job gains came from construction, manufacturing, retailers, hotels, restaurants and temporary help agencies, all typically low-paying sectors. 

Professional Business Services, the industry sector most closely aligned with office using employment, experienced expansion of 560,000 jobs, a year-over-year growth rate of 2.7 percent, just above the five-year average growth rate of 2.6 percent. Temporary Staffing accounted for 87,000 (approximately16 percent) of these positions.

Education and Health Services, which has performed well throughout the downturn being a recession-resistant industry, expanded by 453,000 jobs in the year ended September 2018.

Construction added 315,000 jobs (up 4.5 percent year-over-year) in the year ended September 2018.  Comparing this, construction added 208,000 jobs (up 3.1 percent) in the year ended September 2017.



Unemployment Rate

The Underemployment Rate augments the Unemployment Rate to include anyone marginally attached to the labor force that is either not employed or employed only part time. The Unemployment Rate remains low at 3.7 percent in September 2018, which marks the 24th consecutive month below five percent.

The underemployment rate came in at 7.5 percent in September 2018, a 10 basis point increase from the prior month.

Fortunately, the Underemployment Rate has continued its descent from a 2009 high of just over 17 percent. The spread between the two rates is at 380 bps and has been compressing gradually having reached a high of 740 bps in September 2011.



Wage Growth

As the labor force approaches “full employment,” much attention has been cast to wage growth. The current year-over-year wage growth registered at about 2.8 percent, falling from 2.9 percent the month before (its highest level since 2009).

The past three recessions were preceded by a period of FOMC tightening which align also with an average hourly earnings growth in excesses of four percent, reflecting strong economic activity overall. 



Sources: HFF Research, Bureau of Labor Statistics, Department of Labor, Bloomberg

Prepared by HFF Research Analysts Laura Bancroft and Morgan Allen and HFF Managing Director of Research Jimmy Hinton


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