Gary Burtless | October 3, 2014 11:15am

Another Surge in Employment, but Little Improvement in Workers’ Pay Envelopes 

 

Remember that gloomy jobs report for August? Never mind. Revisions in last month’s numbers boosted estimated payroll gains in August from +142,000 to +180,000, and revisions in older BLS numbers increased employment gains in July from +212,000 to +243,000. Thus, updates in the old payroll numbers added 69,000 to previously estimated job gains last summer.

The good news doesn’t end there. The latest BLS estimates show that employers added another 248,000 payroll jobs in September. On average over the past 12 months payrolls have grown 220,000 a month, about three times faster than needed to keep the unemployment rate from rising. As usual, virtually all the job growth took place in the private sector. Public payrolls grew just 12,000 last month, and job gains in the public sector over the past year have averaged only 4,000 a month. In the same period, private employers added 216,000 payroll jobs a month.

Job gains were especially big in business and professional service industries, which added 81,000 positions in September, up from a monthly average of 56,000 a month over the previous year. Both manufacturing and construction also added to payrolls last month, but job gains were meager. The recovery of construction employment has been heartbreakingly slow. Between early 2007 and January 2011, employment in the construction industry fell 2.3 million, or 30%. Since the 2011 low point construction payrolls have recovered about 650,000 jobs, less than 30% of the jobs that were lost. If there is any good news in these numbers it is that a much-anticipated rebound in the construction industry, if it occurs, could significantly lift the nation’s employment totals.

The new numbers from BLS’s household survey also contained a healthy dose of good news. The number of adults who report holding a job increased 232,000 in September, helping to push down the unemployment rate below 6% for the first time in the recovery. September’s unemployment rate – 5.9% – was the lowest rate since July 2008. The number of people classified as unemployed – that is, jobless and actively looking for a job – fell 329,000.

The fact that the reported number of unemployed fell faster than the number of adults holding a job increased means the number of Americans in the labor force fell last month. Indeed, the labor force participation rate touched a new low in September, notwithstanding the strong and fairly steady job gains of the past year. The weak performance of labor force participation in the face of steady employer demand means that many economists will have to reassess their views of the potential size of the U.S. labor force. Many adults whom we would expect to be in the labor force, especially in the prime working ages between 25 and 54, remain on the sidelines, neither working nor looking for work.

One reason jobless adults may be staying on the sidelines is anemic wage growth. Real hourly wages in the year through August were flat. Real weekly earnings rose just 0.4%. The fact that wages remain stuck despite of 48 successive months of job gains suggests that employers’ bargaining power remains exceptionally strong.

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  Gary Burtless

  Senior Fellow, Economic Studies

  The John C. and Nancy D. Whitehead Chair

  @gburtless
  Gary Burtless researches labor market policy, income distribution, population aging, social insurance, household saving, and the behavioral effects of taxes and government transfers. He was an economist with the U.S. Department of Labo