October 2, 2020

Payroll employment rose 661 thousand in September after rising 1,489 thousand in August and 1,761 thousand in July.

Given the sharp drop in employment beginning in March and continuing into April, the National Bureau of Economic Research has concluded that the expansion ended in February 2020 and the recession began in March 2020.    Given that employment rose sharply in both May and June, the NBER will likely mark the end date of the recession in April  If that happens the recession will have lasted just two months, far shorter than the average length of 8 months.

The September increases were widespread.  Leisure and hospitality industry jobs rose 318 thousand.   Retail gained 142 thousand jobs.  In health care jobs climbed by 108 thousand.  Education employment fell 69 thousand.  Social assistance service sector jobs rose 55 thousand.   Admin and support services rose 28 thousand.  Construction increased 26 thousand.  Factory employment rose by 66 thousand.  Government jobs fell 216 thousand (mostly state and local).  Employment in transportation and warehousing climbed by 74 thousand.

In addition to hiring people, businesses can also lengthen the hours of existing employees.  The nonfarm workweek rose 0.1 hour to 34.7 hours in September.  That has the same impact on aggregate  hours worked as the hiring of an additional 409 thousand workers.  If, in fact, firms had chosen (or had the ability) to hire more workers rather than lengthen the workweek, payroll employment would have risen 1,070 thousand workers rather than the published increase of 661 thousand.

The changes in  employment and hours worked are reflected in the aggregate hours index which rose 0.5% in September to 104.5 after having risen 1.1% in August and1.3% in July..  The drop in the aggregate hours index in the second quarter (blue lines below) explains why Q2 GDP declined by 31.4%.  The index has been rebounding every month since April.

However, the government’s $3.0 billion in fiscal stimulus has quickly spread into the economy.  As a result we anticipate an increase in GDP of 28% or so in Q3 and 7.0% growth in the fourth quarter.

Stephen Slifer


Charleston, S.C.