U.S. employers closed out a cooling labor market summer, surpassing expectations and adding 254,000 jobs in September
Following 50 years of accuracy, the Sahm rule may not apply this time around
“The Great Stay” continues with a 3-year low in wage growth for job changers
Many economic variables lie ahead between rate cuts, hurricanes, and a presidential election
Job growth in the U.S., according to the latest BLS jobs report, jumped to 254,000 jobs in September. This increased from 159,000 in August, ending a summer of labor market cooling. Much of last month’s coverage was focused on the BLS revisions of job gains over the past year, which showed the economy, on average, added 174,000 jobs each month through March this year, versus the 242,000 reported initially. During that time, the most significant employment markdowns were in the professional and business sectors, adding over 350,000 fewer jobs than initially reported. Manufacturing also added 115,000 fewer jobs during that time.
In contrast, July and August 2024 saw upward revisions in job gains from the BLS, with July posting an additional 62% above the initial estimate of 89,000, totaling 144,000, and August increasing by 12% from 142,000 to 159,000.
Amid positive gains in September, the unemployment rate dropped slightly to 4.1% and has remained low by historical standards over the last few months. In July this year, the Sahm Rule was triggered, firing off warning flares for a possible recession, and this has remained the case into September’s data. This rule is an economic indicator created by economist Claudia Sahm in 2019, stating that a recession will occur when the 3-month average unemployment rate rises by at least 0.50% from its 12-month low. This warning sign has gained much attention since being triggered in July because of its historical accuracy, dating back to the 1970s in predicting such economic downturns.
UC Berkeley economist Jón Steinsson shared on NPR’s The Indicator program that while the rule does indicate we are in for a recession, it may not apply this time. He elaborated that a clear driving force has been behind most cases of recession. For example, in 2008, there was a banking collapse; in 2001, the Dot Com bubble burst; in 1991, the Berlin Wall fell, and significant cuts in military spending were made. In all of these cases, there was either a sharp increase in oil prices or an increase in monetary policy. Looking at the current state of the U.S. economy, oil prices are high but not through the roof, and the Fed is loosening monetary policy starting with the September 18 announcement of a 0.5% rate cut.
Steinsson concluded that he was feeling cautiously optimistic about the economy. Recruitics’ CEO Adam Stafford agrees, most recently quoted in USA Today saying that the employment report “is a positive sign for the economy, particularly in the wake of last month’s interest rate cut. We observed an immediate uptick in hiring and new job postings following the Fed’s announcement, indicating heightened confidence among employers. Across our client base, caution is turning towards optimism, reflected in expanding advertising for new positions and proactive recruitment efforts."
Each month, ADP Research Institute’s Employee Motivation and Commitment Index tracks how people think and feel about their jobs and employers. Based on the most recent data released in September, the aggregate index rose 23 points to 135, following a significant drop the month prior. Every sector posted an increase this past month, with the most significant increases in Manufacturing, Information, and Transportation and Warehousing. Based on other recent data from Glassdoor, ZipRecruiter, and ADP, though, these increased commitment ratings may reflect discouraged job seekers falling into “The Great Stay” trend, as opposed to a sign of more satisfied workers.
Glassdoor’s Employee Confidence Index, which measures the percentage of employees reporting a positive 6-month business outlook on their platform, remained unchanged between August and September, rising just 0.1 percentage point to 47.7%. Glassdoor’s Lead Economist, Daniel Zhao, writes, “In a strong job market, employees who don’t believe in their employers are likely to look for a new job. But in a softer job market with sluggish hiring (like the one we are currently in), many of these dissatisfied employees are unlikely to be able to find a new job.”
Meanwhile, ZipRecruiter’s Chief Economist Julia Pollak reports that “a slowing labor market is weighing on job seekers and their finances.” ZipRecruiter’s Q3 2024 job seeker sentiment survey dropped to 90.2, the lowest reading since the survey started in Q1 2022. The data shows that job seekers are becoming increasingly frustrated by their job search experience, which certainly jives with Forbes’ recent coverage that the average job search timeline for American job seekers lasts more than five months at 22.6 weeks total.
ADP’s September Pay Insights data shows that, in addition to the job hunt becoming more grueling for job seekers, it is not paying to change jobs. September closed with an average YoY pay gain of 6.6% for job changers, a three-year low, and just 1.9 percentage points above job stayers. This is a far cry from the peak of the Great Resignation in 2022 when job changers saw YoY annual salary increases of 16+% and more than doubled the YoY pay increases for job stayers. Nela Richardson, ADP’s chief economist, reported to Yahoo Finance that this narrowing gap in pay increases for stayers versus changers is a sign that the labor market is less tight.
There is much to come in the weeks ahead, and it’s not just Halloween that feels spooky. While September presented positive signs for employer hiring and job growth, it is too early to tell the full impact the Federal Reserve’s first rate cut will have on the labor market, and when subsequent cuts may come. SupplyChain360 projected that the Manufacturing sector, for example, won’t see a resulting boost in production until 2025.
In the more immediate future–and in the aftermath of Hurricane Helene, which left mass devastation across parts of Florida, Georgia, South Carolina, North Carolina, Tennessee, and Virginia–Florida’s Gulf Coast is now preparing for a Category 5 storm in Hurricane Milton. These natural disasters are expected to impact the economy as residents and local governments focus on evacuations and emergency support.
Finally, we are just four short weeks away from the U.S. presidential election, with many future economic policies hanging in the balance based on each candidate’s respective plans and presidential goals. Employers should keep these tips in mind as they continue advertising to candidates in an election year.
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