MNI INTERVIEW: Cyclical Job Growth Slowing -Fed's Robertson

Booming U.S. job growth figures belie a steady cooldown in the labor market, considering the health care sector has played an outsize role in overall hiring for reasons unrelated to the economic outlook, Federal Reserve Bank of Atlanta economist John Robertson told MNI.

The health care and social assistance industry accounts for 14% of total payroll employment, but its share of job growth has doubled in the past year to 30% as patient care facilities and social service providers continue to backfill jobs lost during the pandemic, Robertson said in an interview. Excluding the sector, nonfarm payrolls growth is running at a three-month average of 179,000, compared to 340,000 a year ago. (See: MNI INTERVIEW: Fed's Fujita Sees Signs of Jobs Soft Landing)

"The health care sector is not cyclically sensitive," Robertson said, citing continuous growth in care-related jobs through the Great Recession. "It ploughed through that recession and we’re seeing the same thing happen now."

The sector remains 750,000 jobs short relative to an extrapolated pre-pandemic trend, which translates to 10 more months of adding 75,000 jobs at the current pace of growth for the sector, he said. Over the long term, an aging U.S. population will continue to drive higher growth.

"In trying to interpret employment growth as being indicative of the state of the economy, you don’t want to interpret it from this sector. It’s not cyclical at all," Robertson said. "Employment outside health care growing a lot slower than last year."

SEPTEMBER SURPRISE

Atlanta Fed President Raphael Bostic has argued for some time that no more interest rate increases are needed to bring inflation down to 2% over the medium term, and top Fed officials this week appeared to warm to the idea.

The September jobs report surprised Robertson and everyone else with its surge in hiring and sharp upward revisions to August and July payrolls figures, but Robertson cautioned recent government statistics need to be taken "with a really large grain of salt," as falling survey response rates have increased data volatility.

Since the pandemic, more people are failing to answer official surveys, with the response rate for the jobs report falling to 41% from 60% before the pandemic. The response rate of the JOLTS survey, used to estimate vacancies, has fallen to 35%, he noted.

His analysis, if performed ahead of the September jobs report, would have shown health care's share of employment growth at 60%. The September report will be revised two more times. "I'm not getting too excited one way or another about this latest employment number," Robertson said. "I'll wait for the revisions."

Fed Chair Jerome Powell in a speech Thursday indicated he is pleased with the central bank's progress in dampening labor market growth to a more sustainable pace. "Many indicators suggest that, while conditions remain tight, the labor market is gradually cooling," he said.