GSI Analysis: Sept. '20 Jobs Report - Jobs Gains Overshadowed by Astonishing Collapse in Labor Participation - Garden State Initiative

GSI Analysis: Sept. ’20 Jobs Report – Jobs Gains Overshadowed by Astonishing Collapse in Labor Participation


GSI Analysis: Sept. ’20 Jobs Report – Jobs Gains Overshadowed by Astonishing Collapse in Labor Participation

October 15, 2020

  • Unemployment rate decline driven by shrinking workforce, falls to 6.7%,

  • Gain of 60,200 jobs fueled, in part, by temporary Census jobs

  • Labor Force collapses by 229,000 in September, participation rate falls 3.3% to 61.4%

On October 15th, New Jersey’s Department of Labor and Workforce Development issued the monthly jobs report for September 2020. Dr. Charles Steindel, former Chief Economist of the State of New Jersey and current Resident Scholar, Anisfield School of Business at Ramapo College, analyzed the report for the Garden State Initiative:

The September labor market figures were a conflicting medley: A solid increase in jobs (swelled by temporary Census hiring), a remarkable drop in the unemployment rate, and an even more astonishing collapse in labor force participation.

First, the good job news: A net gain of 60,200 jobs, almost the same as August’s 64,000 increase. So far, the state’s job count has made up 56% of the 831,000 lost in March and April.  Almost certainly the national tabulation of the data from all the states (which will be released Friday) will show we were again one of the leaders states in the absolute number and percentage gain in jobs—but we were one of the leaders in the earlier losses. We are still about 8.5% below the March peak; the national average gap is a stronger 7%.

Almost all private sectors saw job gains in September, again led by leisure and hospitality. But even with September’s 18,800 increase, the number of jobs in that sector is still more than 100,000 below (more than 25%) its February peak.

The overall job gain was boosted substantially by a 17,600 rise in government employment. Quite likely temporary Census hires played an important role in the government increase; with the Census count now ending, these jobs will be eliminated (most likely starting in the November report—the Census shutdown likely occurred too late in October to show up then).

The figures on the labor force and the unemployment rate were rather astonishing and important as we look forward. The headline unemployment rate plunged 4.4% to 6.7%. September was the third straight month in which New Jersey set a new record drop in the unemployment rate, which is now less than half June’s 16.8%. New Jersey’s unemployment rate is now under the national average of 7.9%. The fly in the ointment, though, is that the September drop in unemployment was more than accounted for by a massive decline in our labor force participation rate: from 64.7% to a 44-year low of 61.4%  (New Jersey’s labor force participation rarely changes more than 0.5% month to month). Unfortunately, there is no detail and no explanation available to account for this move. It seems much too large to reflect simple statistical noise (these numbers come from a fairly small sample of state residents), and it is hard to speculate what else may lay behind it.

Charles Steindel, Ph.D.

Along with the collapse in the labor force, the number of employed state residents fell by 12,200. While this is quite different than the substantial increase in jobs, it’s not rare to have the two measures differ so much (in June the job count rose 122,500, while the employment number fell about 63,000).

The job numbers are considered more reliable than the data on the labor force and resident employment, so on balance the September report was positive. However, despite the spectacular drop in the unemployment rate, the collapse in the labor force participation rate makes one pause.