Meet the Author

Murat Tasci |

Research Economist

Murat Tasci

Murat Tasci is a research economist in the Research Department of the Federal Reserve Bank of Cleveland. He is primarily interested in macroeconomics and labor economics. His current work focuses on business cycles and labor markets, labor market policies, and search frictions.

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Meet the Author

Beth Mowry |

Research Assistant

Beth Mowry

Beth Mowry was formerly a research assistant in the Research Department of the Federal Reserve Bank of Cleveland. Her work focuses on labor markets and business cycles.

10.02.09

Economic Trends

Employment Situation, September 2009

Murat Tasci and Beth Mowry

Nonfarm payroll losses picked up pace in September, falling by a larger-than-expected 263,000 jobs after a loss of 201,000 in August. Net revisions tacked an additional 13,000 losses onto estimates for July and August, mostly stemming from downward revisions in the government sector. Payroll employment has now fallen by 7.2 million since the start of the recession. However, monthly losses in the third quarter have averaged 256,000, compared to 691,000 in the first quarter and 428,000 in the second.

The unemployment rate ticked up 0.1 percentage point to 9.8 percent, as the number of unemployed people grew by 214,000, and 571,000 people exited the labor force. This is the highest rate since June 1983 and is the result of a steady climb begun in May 2008, with the exception of just one month. The lone exception was July 2009, when the rate did not climb only because a large number of the unemployed left the labor force.

Meanwhile, the employment-to-population ratio, considered a less volatile measure of labor market duress, fell to 58.8 percent, the lowest it’s been since 1984. Average weekly hours of production workers were again cut back and now stand at 33.0, matching the series low set in June.

September’s uptick in payroll decline was not broadly experienced across industries. While losses nearly tripled in government and trade, transportation, and utilites, most other industries have actually improved since August. Goods-producing industries shed 116,000 jobs last month, split roughly between construction and manufacturing. Losses at motor vehicle and parts manufacturers lessened considerably, from 16,000 in August to 3,500 in September, perhaps owing to the resumption of production after the Cash-for-Clunkers program drained dealer inventories.

Service-providing industries lost 147,000 jobs over the month. The greatest decline in services occurred in trade, transportation, and utilities (−60,000), with retail trade contributing the majority of those losses. Industries that saw a smaller drop in September were financial activities (−10,000), leisure and hospitality (−9,000), professional and business services (−8,000), and information, which broke even with zero losses for the first time since February 2008. The professional and business services category has seen substantial improvement since June, when job decline had been in the triple-digits for over half a year. Gains in education and health services slowed to just 3,000, compared to 46,000 in August, due to a loss of 16,900 in educational services. Health care by itself, though, added 20,000 jobs. The government shed jobs for the fifth straight month (−53,000), after having been one of the few job creators earlier in the recession, along with healthcare.

Labor Market Conditions and Revisions

 
Average monthly change (Thousands of employees, NAICS)

July
current

Revision to July

August
current

Revision to August

September
2009
Payroll Employment
−304
−28
−201
15
−263
Goods-producing
−116
6
−132
4
−116
Construction
−69
4
−60
5
−64
Heavy and civil engineering
−7.7
1
−6
2
−12
Residentiala
−19.8
4
−20
3
−13
Nonresidentialb
−42
−1
−34
0
−39
Manufacturing
−41
2
−66
−3
−51
Durable goods
−23
1
−55
−4
−43
Nondurable goods
−18
1
−11
1
−8
Service-providing
−188
−31
−69
11
−147
Retail trade
−45
−1
−9
1
−39
Financial activitiesc
−14
3
−25
3
−10
PBSd
−31
2
−19
3
−8
Temporary help services
−6
2
−7
0
−2
Education and health services
14
−7
46
−6
3
Leisure and hospitality
1
0
−14
7
−9
Government
−58
−30
−19
−1
−53
Local educational services
−55
−24
−17
−8
−13
  1. Includes construction of residential buildings and residential specialty trade contractors.
  2. Includes construction of nonresidential buildings and nonresidential specialty trade contractors.
  3. Financial activities include the finance, insurance, and real estate sector and the rental and leasing sector.
  4. PBS is professional business services (professional, scientific, and technical services, management of companies and enterprises, administrative and support, and waste management and remediation services.
  5. Source: Bureau of Labor Statistics.

The diffusion index of employment change tumbled 3.0 points to 31.9 after two straight gains. The index has climbed from a low of 19.6 in March but remains well below the expansionary threshold of 50. A reading of 50 would indicate a balance of industries expanding and contracting employment.