Blue-collar workers may have more good news when the Labor Department releases non-farm wages for September on Friday.

We see hiring increasing and the unemployment rate falling: economists polled by the Wall Street Journal expect an addition of 485,000 jobs to the US workforce last month, against 235,000 in August. And the US unemployment rate is expected to drop to 5.1% from 5.2%.

“Labor supply constraints also seem to have weighed on the wage bill since the start of the reopening and we believe these constraints may persist even though schools have now reopened and additional unemployment benefits have expired. “, according to an October 1 report. “Ongoing gains in the labor market and strong performance in the economy as a whole could put further upward pressure on wage growth.”

Here are four things to watch out for in the report.

Better wages for low-income workers?

In the first quarter of 2021, business owners believed that reopening schools in early August and improving employment benefits expiring September 5 would create job lines and fill vacancies. But that did not happen.

The reopening of the economy, the lingering effects of fiscal stimulus and very low interest rates are among the reasons cited for the tight labor market.

During the Federal Reserve September At the meeting, Fed Chairman Jerome Powell said he saw no reason why wage growth in lower-paying jobs could not continue. Kevin Cummins, Chief US Economist at NatWest Markets, the UK firm’s investment banking arm


NatWest Group
,

wrote on Friday that he expected “wage inflation to remain very firm”.

With continued strong demand for labor, workers will be in a better position to demand higher wages. An analysis of Internet research on the topic of “labor shortages” suggested further wage increases, Cummins wrote. The analysis, he said, predicts that average hourly earnings will increase by half a percent, which would be a 4.7 percent increase from last year.

Did economists miss a crash in high social contact jobs?

A model used by the St. Louis Fed to forecast employment, which pulls data from a scheduling software company, shows a contraction of 800,000 jobs.

The model is skewed in favor of small businesses with a lot of human contact, such as those most at risk of being injured by Covid,


Jefferies Financial Group

reported, suggesting a dramatic drop in jobs in these sectors.

These companies “have been disproportionately affected by Delta,” the report said, adding that “the downside risk is real.”

Separately, the reservations recorded by OpenTable, which allows users to make restaurant reservations, fell 1.9% in the month leading up to the week of the survey, Jefferies reported, suggesting that consumers again avoid outings that put them in close contact with strangers.

As a result, the expected post-Covid fall recreation boom may run out of steam.

The weak employment figures in September appear to be worse in the leisure, hospitality and retail sectors. Employment in these industries fell 3.7% month over month, according to analytics firm Kronos, as cited by Jefferies. Leisure and hospitality bookings contracted 1.2% month over month in August, while employment was flat in those industries, Jefferies reported, predicting a decline of 50,000.

The numbers could allow the Fed to cut back on asset purchases.

Real-time indicators suggest September was not a good month for hiring, with some economists’ estimates falling below 300,000 new jobs. But the jobs figures released on Friday shouldn’t be bad news for investors.

After the September meeting, Powell was asked at a press conference about what might encourage him to gradually cut back on the US monthly bond buying program. “Personally, I don’t need to see a very solid jobs report, but I like to see a decent jobs report,” Powell said.

Something between 300,000 and 500,000 may be “decent” enough for a gradual slowdown in the pace of the Fed’s $ 120 billion-per-month emergency bond purchases, according to a NatWest analysis, perhaps appeasing them. fears that the Fed is forecasting excessive inflation.

If so, a slight employment boom could provide relief to families who weathered the Covid 19 recession, while reassuring investors worried about inflation.

The fact that the bad job news has been concentrated in the leisure industries could mean that it is not about bad economic fundamentals, but rather about the coronavirus, which is slowing the recovery. If so, vaccination would remain one of the most important economic indicators.

Write to editors@barrons.com


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