Another Big Jobs Miss: All But Two Categories Are Below The 12-Month Trend

For the second month in a row, the jobs numbers in September came in well below expectations.

The Labor Department reported an increase of only 194,000 jobs, well below the estimated 500,000. The big miss was similar to August’s report.

Despite the unemployment rate ticking down to 4.8% from 5.2% and an upward August revision of 131,000 jobs, this is the weakest jobs report since January.

Figure: 1 Change by sector

This next chart compares the current month with the trailing 12-month average. A few key takeaways:

• Government lost 123k jobs
• Only Construction and Trade/Transportation/Utilities saw job growth above the TTM average
• Leisure and Hospitality gained less than half the TTM average

Figure: 2 Current vs TTM

The table below gives a much more detailed breakdown of the numbers and the entire labor force. Some key takeaways:

• Leisure & Hospitality had averaged 173k over 3 months (higher than the 163k 12-month average). This month was only 74k.
• Education and Health lost 7,000 jobs vs a three month average of 42,700
• Local Government lost 101k vs an average of 68k gain over three months
• In aggregate, the economy only added 194k jobs vs a 3 month average of 550k and 12 month average of 474k

Figure: 3 Labor Market Detail

Revisions

This data is subject to revisions as new data becomes available. While the headline release gets a ton of market attention, the revisions get far less. The table below shows the impact of the revisions over different time periods. Please note this is as of the prior month since the most recent month has not seen any revisions. Important items to note:

• The recent three month period has been revised up by 22K jobs per month
  • Even though August was revised up by 131k it was still a big miss compared to the expected 720k
• Leisure/Hospitality had been getting revised upward each month, now they have been revised downwards by over 150k for the last three months
• Manufacturing has been revised upwards by almost 100% over three months, moving from 65k to 120k
• Over 12 months, the total has been revised downward by over 500k jobs or 44k a month

Figure: 4 Revisions

Historical Perspective

The chart below shows data going back to 1955. As the labor force has grown in total aggregate numbers, the recessions along the way have caused dips in the general trend.

The Covid recession can be seen as the greatest job market loss. The chart also shows how much work the labor market still requires to regain the employment level seen before Covid (top far right drawdown). Again, this is despite the unemployment rate falling back below 5%.

Figure: 5 Historical Labor Market

The distribution of the workforce has changed significantly over the last 65+ years. For example, in 1955, manufacturing accounted for 30% of jobs vs 8.4% today. Education/Health Care has tripled from 5% to 16%.

Although the unemployment rate has been sharply falling over the last year (chart above), the labor force participation (61.6%) is still well below 18 months ago (63.4%) and much lower than the 66% pre-financial crisis.

Figure: 6 Labor Market Distribution

What it means for Gold and Silver

The stock market is hyper-focused on the labor market because the Fed uses the data as one of its primary drivers for monetary policy. Although jobs data is seen as a lagging indicator, a strong labor market would more likely result in a tighter Fed. Weak job numbers allow the Fed to be more accommodating in monetary policy. This will result in more quantitative easing, growing the fed balance sheet. Additionally, fiscal support may be stronger in a weak labor market coupled with falling tax revenues. This could put more strain on the federal budget which will only increase the total debt outstanding.

While the market may anticipate tighter monetary policy and less fiscal support in a strong labor market, the Fed is painted into a corner and cannot scale back the monetary stimulus without devastating the economy. Thus, the job numbers may impact short-term movements in the price of gold and silver due to speculative flows, but the long-term positive fundamental outlook should not be impacted by strong job numbers, especially when dominated by Government job gains like the most recent report.

Data Source: https://fred.stlouisfed.org/series/PAYEMS and also series CIVPART

Data Updated: Monthly on the first Friday of the month

Last Updated: Sep 2021

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