Worker Recalls Narrowing

The September jobs report showed worrisome signs that job growth is slowing. Employers added 661,000 jobs, far fewer than August’s 1.5 million. It appears that many of the businesses that had been recalling furloughed workers in large numbers as the economy reopened have finished doing so, removing a tailwind from the labor market. The unemployment rate fell to a still-painful 7.9%, and it could stay stubbornly high for a while. Some employers, particularly airlines, are starting to announce major layoffs. The sky isn’t falling, but it seems clear that the jobs market has a long road back to good health.

Major recalls are still happening in a few industries, including retail, food service, social assistance, amusements and accommodations. These accounted for 515,000 of September’s gains. They would have been higher except for a drop of 349,000 in school employment. 1.3 million fewer workers reported having to work part-time because of poor economic conditions. But initial unemployment claims were still high at 837,000 in the last week of September, and appear to be declining only slowly. Total unemployment is still 6.8 million higher than in February. Also, 4.5 million people, or what would be about 3% of the workforce, reported being unable to look for work because of the pandemic, and so were not reported as unemployed.

As more workers return, wage growth will likely be subdued. Hourly earnings rates are elevated right now because so many low-paid workers were laid off that it caused the average wage rate to jump for people who were still employed. As those low-paid jobs come back, the still-high unemployment rate is likely to lower wage growth from the 3%-3.5% trend seen before the coronavirus crisis.

Telecommuting will remain common for a while. 22.7% of workers were still telecommuting in September, down only a little from August’s 24.3%.