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Alvin Liew at UOB Group’s Global Economics & Markets Research assessed the latest Nonfarm Payrolls figures.

Key Quotes

“The US nonfarm payrolls (NFP) increased by 661,000 in September (below expectations of +850,000 jobs), less than half of the upwardly revised 1.49mn recorded in August. Even as job creation slowed, the unemployment rate continued to surprise on the downside to 7.9% in September (from 8.4% in August, much lower than expectations of 8.2%),the lowest in 6 months. That said, the improvement in jobless rate may have been partly due to a fall in the labor participation rate to 61.4% (from 61.7% in Aug).”

“The Bureau of Labour Statistics (BLS) again highlighted the persistent misclassification of a number of workers as ‘absent’ from work instead of “unemployed on temporary layoff”. This has been an issue for the BLS since March, although the severity of the problem has eased in recent months and BLS noted that it eased further in September.”

“The private sector (877,000 jobs) was again responsible for most /all of the jobs gains while the government subtracted a hefty 216,000 jobs (from +467,000 in August), mainly due to the job losses within local and state government education (-280,000) while federal government cut 34,000 jobs, mainly driven by a reduction in temporary workers for 2020 census survey.”

“The US employment situation has continued to improve post-April, accumulating 11.4 million payrolls increases between May and September, making up for half of the 22 million job losses recorded in March and April combined. Total non-farm employment continued to improve but was still 10.7 million (or 7%) lower than in February.”

“Regardless of the persistent misclassification error, the improvement in the unemployment rate has been impressive, if we judged the severity of the plunge in employment as a result of the pandemic. That said, even with 7.9% unemployment rate, this is still significantly above the low of 3.5% recorded in February. The uncertainty of further stimulus from the government may draw even more into the job market, thereby re-increasing participation rates. And with the job recovery showing a clear deceleration and potentially a significant reduction in government jobs in coming months, we think the unemployment rate could inch back above 8% on the back of rising participation rates while the number of new jobs could drop below 500,000 as early as October.”