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September jobs report disappoints with 661K added vs. 859K expected

Bankrate.com Senior Economic Analyst Mark Hamrick joins Yahoo Finance’s Zack Guzman to discuss the September jobs report.

Video Transcript

ZACK GUZMAN: The last report before the election showed further evidence that this recovery is losing some steam. Nonfarm payrolls increased by 661,000, compared to the median estimates, for a gain of 859,000. That was noticeably weaker than the upwardly revised 1.49 million jobs added in the month of August, according to the Labor Department.

And interestingly, the unemployment rate fell by more than forecast, dropping 0.5% points down to 7.9% percent, largely due to a drop in the labor force participation rates pronounced among younger women here in the country. And here to discuss all those moves and what it means for potential hopes of more stimulus with us is Mark Hamrick, Bankrate.com senior economic analyst. And he joins us now.

And Mark, I mean, when you looked at this report, talk to me about what you saw there. Because a lot of people were talking about how this was not good when you see the headline number come in below expectations, but also the labor force participation rate falling, as well. What stood out to you?

MARK HAMRICK: Well, you did a great job of framing it there, Zack. So I appreciate that. It makes it a lot easier. I think, first of all, coming into this report, I think we thought that the narrative of the economy was much the same as what we believe it to be today with just some slight plot twists. So what I mean by that is, after we've now seen this report-- 661,000 jobs recovered or added-- it's important to note that the trajectory of the job gains that we're getting is now lower and has been falling, really, for several months now.

So if you look at two factors-- first of all, the direction. Those jobs are being restored. Above the rate of that restoration is less positive than it was before. Many people may be drawn to that headline that the unemployment rate fell more than expected, a decline of 5/10 of 1%. But you hit the nail on the head there that, depending on which numbers you're looking at here, perhaps some of the employment numbers are less positive than expected. And also, if you have a smaller share, either looking for work or working, then that plays into how this number essentially is derived.

And so we know that there's a significant number of women who would otherwise be in the workforce who currently, basically, are making the decision or feel forced to stay at home to care for children who cannot go to school. And once again, of course, we see higher rates of unemployment for blacks, Hispanics, and teenagers who want to work.

So you know, here we have the last report before election day. Mindful that some people have already been voting or have mail-in ballots or absentee ballots and are ready to use those. And I think, again, narrative isn't significantly changed for those of us who are dialed in on all this.

ZACK GUZMAN: Yeah, and I mean, when you think about that narrative, it is something that we've been watching play out over the last couple months, as you said. It is slowing recovery here, as the jobs gains have been much more muted. But interestingly, the other trend has been a big chunk of these job gains that have come back here have been in the leisure and hospitality sectors, those that have been hardest hit in the downturn that we saw happen earlier in the spring when lockdown measures really coming in full force.

But a lot of those gains as we head into Q4 here, the winter months, questionable when we think about what could happen past the election. Because a lot of those jobs, as we know, tied to maybe what could happen on the health front if we see restaurants once again have to lock down as we're already seeing coronavirus cases rise here.

So if this is the case, if we are seeing the recovery falter, what do you think that does to the idea of pushing stronger right now, as we see Republicans and Democrats still not coming together here? Of course, Democrats passed their bill yesterday in the House, but what does it say about how-- how needed some stimulus is right now to keep this recovery going?

MARK HAMRICK: Sure. And by the way, on the leisure and hospitality piece, we still have a deficit of 2.3 million jobs from where we were in February in that space alone. And we know that when we're talking about bars and restaurants, these are some of the enterprises that are less able to survive under the best of circumstances, and these are the worst of circumstances. So until people feel fully free to go back to those establishments, either because restrictions have been lifted or because they're vaccinated, that risk persists.

It does feel as if those story lines, with respect to the relief legislation, are changing rapidly. Just today, we've seen Speaker Pelosi say that she believes the prospects of a deal between the White House and herself, essentially, or the House, have improved because of developments of the last 24 hours or so. But I still think the sticking point remains the Senate.

And so there is the political calculus and there is the economic calculus. And I get asked all the time by people who, perhaps, are most interested in the political part of that where I need to shift them to the economic part of that. Because the political part isn't as, let's say, in our wheelhouse at Bankrate as is the economic. And just the fact of the matter is that, no matter how you feel-- one feels-- about the economic aspects, or I should say the political aspects of all this, either you're going to help the economy with such a economic measure or relief measure or you aren't.

And so if you don't, then there's a negative impact from that, leaving aside the long-term implications of debt and deficits, which also are significant. Or if you do, then there are more individuals who have more money to spend. There are enterprises that have a greater prospect of remaining solvent. And for example, the airlines, then, would not have to engage in the furloughs that they told us that they will in fact conduct.

ZACK GUZMAN: Yeah, and that's one of the things, too, because we also got the consumer sentiment report here out of the University of Michigan. And that was interesting because it would be kind of an outlier to what we've seen in terms of weakening data. This time around, the sentiment report hit a sis-month high, as Americans grew more optimistic at the end of September that we could see an improvement on the economy there. The reading climbed to 80.4 from a preliminary reading of 78.9.

We're still low-- far below what we saw before the pandemic hit here, but I guess, directionally, it would seem to indicate that consumers are getting a little bit more confident there. So how do you put those two pieces together, especially as we approach the holiday season, since we know this is a unique time for everybody?

MARK HAMRICK: Well, I think those remain quite at risk, or let's say, volatile. And there's an interesting mix about the difference of assessments versus-- assessments of the future versus the present. And I would say that those remain subject to change, as well.

I think one of the most important things is consumers' willingness and capability to spend. And so, for example, when we see the income and spending figures, obviously the capability is dramatically affected by whether Americans are getting stimulus checks or not. And that's one of the reasons why we saw the strong rebound in retail sales that we saw earlier in the year.

One of the destructive natures of innovation that's going on right now is, of course, the fact that brick and mortar is suffering at an increased pace to the benefit of online. And so, as 2020 has been a year unlike any other, this holiday shopping season will be unlike any other. And that will have negative implications for brick and mortar no matter how you cut it.

ZACK GUZMAN: Yeah, and again, it's the last jobs report we'll get before the election, but we'll see what happens from here. Mark Hamrick is Bankrate.com's senior economic analyst. Appreciate you taking the time to chat.

MARK HAMRICK: Thank you.