Newsletter: Factories Are Slumping, Services Are Slowing and the Labor Market Is …

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It’s jobs day! Is the labor market holding up as a manufacturing slump weighs on the rest of the economy? Look for a special edition of our newsletter after today’s September jobs numbers are released.

Slow Service

U.S. services-sector activity last month expanded at its slowest pace in three years, prompting concerns a manufacturing downturn is spreading across the economy, Amara Omeokwe and Paul Hannon report.

• The Institute for Supply Management’s U.S. nonmanufacturing index slipped to 52.6 in September, the lowest reading since August 2016. Readings above 50 indicate an expansion in activity, while those below 50 indicate contraction.
• The services-sector deceleration comes as U.S. manufacturing has struggled. The ISM’s manufacturing index held below 50 in September to reach its lowest level since June 2009.
• The eurozone is suffering similar setbacks, with manufacturing contracting and services activity deteriorating.
• “The data today confirms our fears that the impact of the trade war is indeed spreading from the manufacturing sector to the services sector,” said Torsten Sløk, chief economist at Deutsche Bank.

WHAT TO WATCH TODAY 

U.S. nonfarm payrolls for September are expected to rise by 145,000 from a month earlier, the unemployment rate is expected to hold steady at 3.7% and average hourly earnings are expected to rise 3.2% from a year earlier. (8:30 a.m. ET)

The U.S. trade deficit for August is expected to widen to $54.5 billion from $54.0 billion a month earlier. (8:30 a.m. ET)

The Baker Hughes rig count is out at 1 p.m. ET.

Federal Reserve officials are out in force: Boston’s Eric Rosengren speaks at his bank at 8:30 a.m. ET, Atlanta’s Raphael Bostic speaks on the economic outlook at 10:25 a.m. ET, Minneapolis’s Neel Kashkari speaks on local housing policy at 1 p.m. ET, Chairman Jerome Powell speaks at a “Fed Listens” event at 2 p.m. ET, governor Lael Brainard moderates a panel on employment at 2:10 p.m. ET, and Vice Chairman Randal Quarles moderates a panel on inflation at 4 p.m. ET.

TOP STORIES

Tired: Unemployment Rate. Wired: Employment-to-Population Ratio

Despite some warning signals, the U.S. economy still appears to be growing at a fair clip. The big strength: A record stretch of job creation that is slowly boosting wages and supporting consumer spending. The September employment report should offer a few clues on how the labor market is holding up amid a manufacturing downturn, global slowdown, heightened political and trade-policy uncertainty, and geopolitical frictions. What to watch:

• Payroll growth has been slowing, but not yet enough to cause alarm. Economists are forecasting a net gain of 145,000 nonfarm jobs for September, a marked deceleration from last year but still enough to absorb new labor-market entrants. Watch private-sector job creation closely in case headline numbers are again distorted by Census hiring.

• In August, the share of prime-age Americans (25-54) with a job rose to the highest level since 2008. Labor-force participation for those in their prime working years matched its highest level since April 2010. If sustained, that would suggest strong demand from employers is pulling more Americans off the sidelines and into the labor force, key to improving living standards, boosting consumer spending and sustaining the expansion.

Whatever It Takes

Federal Reserve Vice Chairman Richard Clarida said the central bank will do what it takes to keep the longest U.S. economic expansion alive. “I do think the economy is in a good place,” Mr. Clarida said. The Fed wants to ensure that steady growth, low unemployment and levels of inflation that are close to the central bank’s target persist, he said. Mr. Clarida refrained from giving a clear indication of what is likely to happen at the central bank’s policy meeting in late October, Michael S. Derby reports.

Betting On a Rate Cut

Traders are increasing wagers that the Federal Reserve will continue to cut interest rates to stave off a recession. Federal-funds futures, used to wager on the path of monetary policy, on Thursday showed traders pricing in a roughly 96% chance of at least one more rate cut in 2019, up from 66% on Monday, according to CME Group data. But while there are some signs that lower rates are helping the housing sector stabilize, many analysts still project weaker economic activity without a U.S.-China cease-fire on tariffs, Amrith Ramkumar reports.

Good Time to Visit Europe?

Yes, the U.S. economy appears to be slowing. Europe’s is slowing even more. The result: The euro has drifted toward its lowest levels against the dollar in years. The currency briefly sank below $1.09 this week, the lowest since May 2017 and not far off the levels below $1.04 last reached in 2003. Sending the currency weaker are the eurozone’s deeply negative rates and expectations of further easing from the European Central Bank. Also at play: Broader concerns about trade tensions and the slowing global economy are sending money into haven assets, like the dollar. Whether the euro’s slide will continue rests in part on who will be more aggressive in easing, the ECB or the Federal Reserve, Avantika Chilkoti and Paul J. Davies report.

Explaining the Pay Gap

Over the past six decades, women have enrolled in college in greater and greater numbers. Those born in the mid 1980s are 22% more likely to hold a bachelor’s degree than men. Yet they still see lower wages. That may have something to do with what women study and the jobs they take once they graduate, according to new research. Female students tend to major in fields that lead to lower-paying jobs than their male counterparts. And even when they do major in traditionally male-dominated fields, they often end up in jobs with lower potential salaries. The good news: Women have started to move into traditionally higher-paying and male-dominated majors. The bad news: They still are more likely to graduate with degrees in areas associated with lower-paying jobs, David Harrison reports.

Freelance Is Just Another Word

More Americans are freelancing because they want to, not because they have to. A study for freelance jobs website Upwork and the Freelancers Union showed 60% of freelancers started working that way by choice, rather than by necessity, a 7% percent increase since 2014. Half of freelancers view their work as a long-term choice, instead of a temporary way to make money.

• “With the labor market getting stronger, we’re seeing the freelance economy evolve, just like the rest of the labor market,” Adam Ozimek, Upwork’s chief economist, said. “Freelancers are increasingly working on the terms that they want.”
• The number of freelancers working part-time decreased 6% from 2018, the survey found. Meanwhile, 28% of freelancers do their work full-time, the same level as last year, but an 11% increase from Upwork’s 2014 survey.

—Amara Omeokwe

TWEET OF THE DAY

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