Deep Tracks From Friday’s Jobs Report

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Deep Tracks From Friday’s Jobs Report

Friday’s Jobs Report was one of those mythical “Goldilocks” releases that bullish investors dream of, so let’s dig into our favorite deep tracks from the release:

#1: African American unemployment

  • We have long argued (based on academic research) that this is a reliable indicator of major turning points in the US labor market. When African American joblessness begins to spike, broader measures of US unemployment increase in later months.
  • September’s unemployment rate for this cohort remained at 5.5%, equal to last month’s reading. That is a record low back to 1972 (first data collected) and below last year’s 6.0% rate.
  • African American labor force participation rose from last month’s 62.2% to 62.4%, the same as last year.

Conclusion: there is no sign of an impending deterioration in US labor market conditions based on the latest African American employment data.

#2: Workers with only a high school education

  • 25% of the US workforce ended their formal education with a high school diploma. This is about that same as those workers with a 2-year college degree or who attended a 4-year program but did not graduate (26%). For reference, 41% of the domestic workforce has a 4-year degree (i.e. less than half).
  • The unemployment rate for this cohort last month was 3.6%, the same as the last 2 months and equal to the all time record lows in Q3 1999.
  • Participation rates for this group are stable at 57.8% last month, slightly higher than the average of the last 3 months (57.5%).

Conclusion: despite recent weakness in manufacturing, which disproportionately affects this cohort, unemployment rates for high school-educated workers remained unchanged last month.

#3: U-6 unemployment, the most comprehensive measure of US labor markets

  • Last month’s reading was 6.9%, down from 7.5% a year ago and 7.1% for the prior 3 months.
  • September’s U-6 unemployment ties April 2000’s record low for this data set back to 1994 (first data collected).

Conclusion: it’s not just the headline unemployment number that is showing continued domestic labor market resilience.

#4: Labor Force Participation (LFP, the percent of Americans employed or looking for work)

  • US LFP last month was 63.2%, the highest reading since January/February 2019.
  • This increase is due to greater female LFP, with last month’s reading of 59.1% the highest since late 2012.
  • Male LFP remains stagnant at 71.6%, similar to levels of the last 4 years.

Conclusion: last month’s record low unemployment came with rising LFP, a positive sign about the state of the US labor market.

#5: Wage growth

  • Slower wage growth is a large part of what made Friday’s report so positive for markets, hungry as they are for another Fed rate cut.
  • Average hourly earnings grew by an annual rate of 2.9% as compared to a prior 3-month average of 3.2%.
  • Average weekly earnings also slipped from the trailing 3-month average of 2.8%, to 2.6%.

Conclusion: as we’ve highlighted in past notes, wage growth remains low in part because workers remain oddly reluctant to demand higher wages despite low unemployment rates. Our proof point: a 5-year history of US Google searches for “ask for a raise” and “get a raise”. Neither shows any real growth, perhaps a hangover from the Great Recession.

The Google Trends chart shows this:

Summing up: despite capital markets’ very real concerns about an impending US recession, nothing in Friday’s Jobs Report shows such an event is near at hand. We absolutely understand why these worries linger. But if we had told you a year ago that the US would be neck-deep in a trade war with China and global economic growth would be at a crawl, we doubt you would have pegged September unemployment at 3.5%. And yet, here we are.