U.S. Experiences Lowest Unemployment Rate In Half a Century

October 4, 2019
Author: Jay Denton

The U.S. Labor Market added 136,000 jobs, close to economists' estimates of 145,000. Although this is still a deceleration compared to 2018, slower nominal job gain continues to be expected.

Despite general global economic slowdown, the job market remains healthy with:

  • Decreasing unemployment rate
  • Increasing wages
  • Strong consumer spending

ThinkWhy™ It Matters

U.S. businesses, particularly those outside of the manufacturing industry should remain cautiously optimistic.

Most employers will continue to experience a tighter labor market and should:

  • Continue to offer competitive wages and strong benefits packages to recruit top talent
  • Consider strategies to implement alternative workforce employees
  • Hire based on company revenue performance as opposed to recession noise
  • Increase investment in workflow automation and process improvement
  • Budget for enhanced training, upskilling and use of freelance talent

Businesses should continue to confidently hire for key jobs. Companies operating in manufacturing should have a foundational contingency plan for slowdowns that occur in the near and long term.

National Summary

U.S. employers continued to add a healthy volume of workers in September with additional positive gains in July and August. Tariffs and manufacturing slowdown are all forces creating uncertainty for the labor market but for now, jobs remain in a healthy spot.

Monthly Job Gain and Annual Job Growth September2019

The Positives

  • Labor force participation rate held at 63.2 percent in September 2019
  • New entrants (those never having held employment before) increased 15.2 percent (+103,000)
  • The unemployment rate went down from 3.7 percent in August to 3.5 percent in September
  • The change in total nonfarm payroll employment for July and August combined was revised up by 45,000 jobs.
  • Consumer spending remains strong, especially in sectors that produce consumer goods as well as large items not yet impacted by tariffs like homebuilding
  • Consumer confidence is expected to remain stable through the coming quarters

The Negatives

  • Even though average hourly earnings slowed from 3.2 percent to 2.9 percent over the year, the drop in the unemployment rate indicates the labor market is tightening further which could drive wage growth back up
  • The U.S. nonfarm total employment increased by 136,000 jobs in September, of which only 22,000 were government jobs produced by State and Local governments. Private sector job growth was 114,000.
  • Job gain has averaged approximately 161,000 jobs per month through September 2019, compared to a 220,000 job gain for the same period in 2018
  • A softening global automotive market along with trade war impacts have caused manufacturing indexes to dip to their lowest since 2009

Industry Movement

Job Gain by Industry September 2019

Education and Health Care Services make up 16.1 percent of total employment. Education and Health Care Service produced approximately 40,000 jobs this month.

Within Health Care Services, Ambulatory Health Care Services employment produced 28,700 jobs. Within Education, Elementary and Secondary School employment produced 13,900 jobs.

Professional and Business Services make up 14.2 percent of total employment. Gain within this industry was 34,000 jobs. Monthly job gains in the industry have averaged 35,000 jobs thus far in 2019, below the average monthly job gain of 48,000 in 2018.

Within this industry, employment in Management and Technical Consulting saw the largest increased by 5,600 jobs.

Government jobs increased by 22,000. Hiring of temporary workers for the 2020 Census was only represented by 1,000 this month. The average tenure for Census-related jobs is between six weeks and two months.

Leisure and Hospitality makes up 11.0 percent of total employment. Gain within this industry was 21,000 jobs.

Financial Activity makes up 5.7 percent of total employment, averaging monthly job gains of 9,000 for 2019. This is below the average of 11,000 per month in 2018.

Manufacturing shed jobs during September 2019. Construction saw increases of 7,000 jobs.

What to Expect

At this stage of the economic cycle, some deceleration in job growth is expected. Although this reduction is expected, moderate job gains for the remainder of 2019 should be seen, albeit below the 2018 growth rate. The annual pace of job gains in September 2019 was 2.147 million or 1.44 percent.

Job Gain and Growth September 2019

The Outlook

  • Long-term job growth is expected to slow meaningfully starting late 2020 and will reach the trough during the 3rd quarter of 2021. U.S. workers with a high savings rate and higher net worth, especially due to home price growth, slowdown or even a recession in 2021 would be short-lived and less painful than previous downturns.
  • Expect Professional Business and Technical Services and Healthcare industries to continue to lead the job gain and growth in the U.S.
  • Mining and Logging and Trade, Transportation and Utilities sectors will continue to struggle to add jobs in the near term.
  • Expect gradual increases during late 2021, with the magnitude of growth expected to increase during 2022 and continue at a robust trajectory through 2024. After the low in Q3 2021, availability of labor is expected to loosen up along with new workers joining the labor force.
  • Excluding the Great Recession, historically low unemployment rates will force the U.S. economy into a shortage of skilled labor conditions, creating a hurdle to higher nominal job gain despite healthy U.S. economic fundamentals