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Hiring is stuck in low gear. Here’s why

US employers added 194,000 jobs in September, the smallest gain this year. Blame COVID-19 fears and changing worker attitudes for a strangely tight labor market.

There were a record 11 million job openings in July, according to the US Labor Department.
There were a record 11 million job openings in July, according to the US Labor Department.Frederic J. Brown/Getty Images

The labor market isn’t working.

Nearly 8 million Americans were unemployed last month, the US Labor Department said on Friday, yet hiring crawled at its slowest pace of the year. The pool of willing workers shrank as employers drove themselves to distraction looking for help.

“We’ve tried everything . . . nothing seems to work,” said Jamie O’Bryan, manager of Amrheins restaurant in South Boston. “It’s not even just the restaurant business. It’s everything. It’s just ridiculous.”

Amid a surge in COVID-19 cases and changing worker attitudes, just 194,000 jobs were created in September. At the same time, the unemployment rate fell to 4.8 percent from 5.2 percent, mostly because people left the workforce.

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It was the second straight month of tepid job gains, after hiring declined dramatically in August. The disconnect between the demand for workers and supply is continuing to constrain the economic recovery. Before the drop over the past two months, employment had climbed by a monthly average of 636,000 jobs in 2021.

Economists had forecast that about 500,000 jobs would be added last month, as children went back to school, parents responsible for child care returned to work, and enhanced federal jobless benefits ended.

“There are a lot of theories” about why hiring is fading, said Tony Roth, chief investment officer at Wilmington Trust. “We are in uncharted territory here.”

The meager hiring gains were led by leisure and hospitality businesses, though there was little change at restaurants and bars, which say they simply can’t attract enough workers. Among the other industry sectors where jobs are going begging: hotels, trucking, hospitals, and skilled trades such as electricians and carpenters.

Public schools across Massachusetts, for example, have faced widespread labor shortages and are in need of substitute teachers, paraprofessionals, bus drivers, cafeteria staff, and mental health workers. Some districts are also short on licensed teachers for science, math, and English as a second language.

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“They’re finding it very difficult to find people,” said Tom Scott, executive director of the Massachusetts Association of School Superintendents.

But there was good news in the report, too.

The previously released payroll increases for July and August were revised higher. The Labor Department’s survey of households yielded much stronger job gains than did its separate tally garnered from employers.

And the private sector added 317,000 jobs last month, a respectable gain.

Losses in the government sector reduced the overall job gains, but they came almost entirely in state and local education jobs. The Labor Department’s method of adjusting the survey results for seasonal changes yielded a loss of 161,000 public education jobs. That overstates the direness of the situation because, on an unadjusted basis, school hiring actually increased.

Another thing to keep in mind: The monthly jobs report is backward-looking. The separate employer and household surveys used to compile the monthly jobs report were completed in mid-September, as the latest COVID wave was cresting. Since then, new cases have fallen, and more recent data have suggested a pickup in hiring.

“There is lots of data in this report and almost everything except the headline is much more positive than the headline,” tweeted Harvard economist Jason Furman.

The unemployment rate remains above its 3.5 percent prepandemic level, and there are still 3.3 million fewer jobs than in February 2020.

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It’s not clear whether the report will alter the Federal Reserve’s calculation on when to begin tightening credit, which it signaled could come as soon as November. The reaction in financial markets on Friday was muted.

President Biden tried to put an upbeat spin on the new data.

“Jobs up. Wages up. Unemployment down. That’s progress,” Biden said in a speech at the White House. He called on Congress to boost the labor market by passing infrastructure and social spending bills that contain many of his priorities.

September’s numbers are the first to reflect the cutoff of pandemic employment benefits in all states, including extra payments of $300 a week. On Thursday, the Labor Department said 4.2 million Americans were collecting some form of benefits as of Sept. 18, compared with 12.1 million a month earlier.

Here are some other key indicators from the Labor Department’s report.

  • The labor force participation rate was 61.6 percent, down 0.1 of a percentage point from August. Economists are closely watching this number — the percentage of the civilian population 16 years and older that has a job or is looking for one — for signs that people are returning to the workforce after a sharp drop-off during the pandemic.
  • There were 26,000 fewer women on the payrolls in September than the month before. Women left the labor pool at a higher rate than men at the start of pandemic-induced recession last year, and they have not returned as quickly. It’s a trend blamed on the difficulty of finding child care and the sharp losses in industries — such as restaurants and hotels — where women are overrepresented.
  • Among both sexes, the ranks of the unemployed fell by 710,000 to 7.7 million in September; that’s 2 million higher than in February 2020.
  • The number of permanent job losers declined by 236,000 to 2.3 million, but that is more than 950,000 higher than in February 2020. The number of workers on temporary layoff was little changed last month at 1.1 million.
  • The unemployment rates for white and Black Americans fell last month, while the rate for Asians and Hispanics was little changed.
  • Average hourly earnings for all employees on private nonfarm payrolls rose by 19 cents to $30.85 in September, a 4.6 percent increase over the year.

What does this all add up to?

The economic damage caused by the pandemic was like nothing that’s happened before. It’s not terribly surprising that the recovery isn’t following patterns of the past.

Some Americans remain hesitant to go back to work while COVID is still a danger or because they are required to be vaccinated. Others have retired. And still others have decided that they no longer want their old jobs, especially if they demand long hours at low pay.

It’s going to take some time for everything to sort itself out.

Naomi Martin and Jim Puzzanghera of the Globe staff and Globe correspondent Angela Yang contributed to this report.

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Larry Edelman can be reached at larry.edelman@globe.com. Follow him on Twitter @GlobeNewsEd.