September Jobs Report Shows Signs of Business Recovery but Inflation Remains a Problem: CEI Analysis

The federal government today released its data on how many jobs the U.S. economy added during the month of September: 263,000. CEI experts offer analysis on what this means for the labor market, wages, and inflation in the near future.

Sean Higgins, CEI Research Fellow

“The economy’s gain of 263,000 jobs in September, knocking the official unemployment rate back down to its recent low of 3.5 percent, was primarily due to businesses shaking off the last lingering effects of the Covid-19 pandemic.

“The Labor Department reported Friday that only 1.4 million persons reported being unable to work because their workplace closed or lost business due to the pandemic, down 500,000 from the previous month, and that the number who worked part time for economic reasons declined by 306,000 to 3.8 million. The data indicates that recent media reports of businesses cutting back in hiring were balanced out by more business staying open and employing people full-time.”

Ryan Young, CEI Senior Fellow

“The labor market remains strong but it might be beginning to cool. The unemployment rate in September shrank to 3.5 percent on a gain of 263,000 jobs. Part of this good news is due to a quirk in how the numbers are calculated. The unemployment rate only counts people who are actively looking for work.

“Despite the dropping unemployment rate, the total labor force shrank in September by 57,000 people, due to a rise in discouraged workers. Since this 57,000 is out of about 161 million people, this is not that big a deal. At most, it partially cancels out August’s increase. The labor force is still larger than it was in July. But this is something to keep an eye on, especially since real wages are not keeping pace with inflation, which can discourage potential workers.

“It is also significant that the labor force has not kept pace with population growth since COVID hit. While the labor force has grown by about 163,000 people since the pandemic began, U.S. population has grown by about 2.3 million.

“In short, the labor market is holding up well under continued inflation but isn’t perfect. The Federal Reserve needs to stick to its inflation-fighting commitment, and Congress and President Biden need to remove labor market frictions such as tariffs and trade barriers and excessive permit and occupational licensing rules.”

Joshua Bandoch, CEI Research Fellow

The jobs number look a lot better than they really are. Despite adding over 264,000 jobs, the labor force participate rate ticked down, a sign that far too many people are removing themselves from the workforce entirely.