Monday Market Update 10-11-2021

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It was another mixed week in the stock market. Market volatility remains higher as uncertainty looms from both the economic outlook, as well as debates in Congress around the debt ceiling and major spending bills. Catch all the details below for this week’s Monday market update or listen on this week’s episode of Finance Explained.


Last Week in the Market

Last week the stock market got off to a rough start, but managed to eke out a gain, up +0.8% for the week, and now up nearly 2% for the month of October following September’s sell-off.

Monday, Facebook’s 6+ hour outage drove its stock to sell off by more than 5% and took much of the market with it. The market recovered those losses over most of the rest of the week after Congress reached a short-term deal on the debt ceiling. The country now has a temporary reprieve from the risk of default… at least until December 3rd, when we could face the same negotiations all over again.

Treasury yields continued a steady march higher. Investors are beginning to be more concerned that inflation may not just be transitory, as the Fed has alleged for most of 2021. And with the unemployment rate now at 4.8% as reported Friday, and inflation continuing to rise, it’s all but a certainty that the Fed will move forward with its plans to taper asset purchases, its first phase at reducing accommodative monetary policy, before the end of the year. The 10-year treasury yield ended the week at 1.612%, its highest level since May.

One thing Monday’s Facebook outage thrusts into the spotlight – just how top-heavy our market indices have become. Over the last 25 years, the top 5 companies in the market-cap weighted S&P 500 have averaged about ~13% of the weight of the index. Today, the top 5 companies (including both classes of Google’s shares), account for over 22% of the index. This is even higher than during the peak of the tech bubble when the top 5 names represented 16% of the index (and weren’t all tech stocks either).

This is a reflection of the market dominance of these companies in our current economy. But it also makes the market index more concentrated, more volatile, and with higher exposure to potential looming increased regulation in social media especially.

What alternatives are there? You can look at broader indexes, like total market or the Russell 3000, with far more names. You can look at mid-cap and small-cap indexes, like the Russell 2000, which shifts exposure away from more concentrated large-cap names entirely, and you can also look at equal-weighted indexes instead of market-cap-weighted ones, where all companies get equal weight, diminishing the weight of large-cap names.

In addition to the the debt ceiling negotiations in Congress and Facebook outage, last week we also got data on:

  • Weekly Jobless Claims for the week ended September 11, 2021
  • September Employment Situation report

More on all these stories below or get the full update on this week’s episode of Finance Explained.

Weekly Jobless Claims for 10/2/2021: 326,000 new claims

Weekly jobless claims decreased reversing an upward trend we had seen in the second half of September.

For the week ended October 2nd, new initial jobless claims were 326,000. Continued claims for the week ended September25th declined slightly to 2.7 million, a 2.0% insured unemployed rate, and unchanged from the week prior.

Insured unemployment and continuing claims under all programs comes at a 2 week lag, so this is just the second week of data after the end of the federal programs, for the week of September 18th. Prior to the end of the federal programs, 80% of continued claims benefits were under the Federal PUA (for those who may not previously have been eligible for state benefits, like self-employed and 1099 workers) and PEUC (for workers who have exhausted the max weeks of benefits under state programs) programs.

As anticipated, we saw a drop in insured continuing claims of 6.2 million for the week ended September 11th, and saw a drop of nearly 1 million more for the week ended September 18th, for a decline of 7.1 million continuing claims in just 2 weeks.

Remember, this doesn’t mean these people have gone back to work – it just means that their weeks of eligibility have ended, and they are no longer eligible to collect unemployment benefits. In addition, remember that the additional $300 per week of federal unemployment benefits has ended for everyone – even if they are still receiving state benefits.

How will this impact the labor market? The expectation was that it would encourage workers to return to the labor force… more on that below in September’s Employment Situation report.

Next Data Point?
Weekly jobless claims are released by the Dept. of Labor every Thursday

September 2021 Employment Situation: +194,000 jobs, 4.8% unemployment rate

If only given the headline, the September Employment Situation report sounds pretty good: total nonfarm payroll employment rose by 194,000 jobs in September, and the unemployment rate fell by 0.4 percentage points to 4.8%, both signs the labor market is improving. But, economists expected there to be +500,000 jobs added, and the decline in the unemployment rate? It wasn’t because unemployment improved as much as the labor force shrunk more than anticipated.

To recap, the lockdowns associated with the pandemic in early 2020 created the largest employment contraction our economy has ever experienced. We lost more than 22 million jobs in just 2 months over March and April 2020, half of which were quickly recovered in the 5-6 months that followed. The next 5 million jobs recovered have come at slower pace, and in recent months, we’ve seen the rate of recovery slow yet again. Through September 2021, we are still 5 million jobs short of pre-pandemic peak employment levels.

What do the various terms and data reports actually mean?

To better dissect this month’s employment report, I want to explain a few things about how the data is collected, the various terms, and the calculations used.

Weekly Jobless Claims

First, let’s start with the Weekly Jobless Claims data… weekly jobless claims data is based on actual filings for and recipients of unemployment benefits. Initial claims are people newly filing for unemployment benefits and continued claims are those continuing to collect benefits. It is the closest we have to real-time unemployment data, as numbers are reported weekly. The shortcoming in looking at just unemployment benefits claims is that not everyone is eligible for unemployment benefits, so it does not fully capture the total unemployment picture.

Employment Situation Data

That brings us to the monthly Employment Situation report. This data is based on two separate surveys:

  • Current Population Survey (CPS), or Household Survey
  • Current Employment Statistics survey (CES), or Establishment Survey

The Household Survey is a sample survey of about 60,000 eligible households conducted by the U.S. Census Bureau for the U.S. Bureau of Labor Statistics. It collects information on the labor force, overall employment and unemployment. The Establishment Survey is collected by the Bureau of Labor Statistics. BLS collects data each month from the payroll records of a sample of nonagricultural business establishments. Each month, they survey about 144,000 businesses and government agencies, representing approximately 697,000 individual worksites, in order to provide detailed industry data on employment, hours, and earnings of workers on nonfarm payrolls. This sample represents about one-third of all nonfarm payroll jobs.

The data, for both the household survey and payroll data for the establishment survey, is typically collected around the 12th of the month.

While surveys of this great a number tend to have low sampling errors and high confidence intervals, some of the seasonality adjustments made to the data – which try to normalize the data for things like summer jobs and school calendar and holiday hiring – have become muddled by the impacts of the pandemic which disrupted some historical seasonality patterns.

Another potential shortcoming? In economic downturns, more workers than normal become discouraged and may fall into long bouts of unemployment. By the survey’s definition, you are only classified as unemployed and part of the labor force if you have “made specific active efforts to find employment” in the 4 weeks prior to the survey. If you aren’t actively looking for work, you aren’t considered unemployed. And if you aren’t considered unemployed, and are not currently employed, you also aren’t counted as part of the labor force.

Despite weaker than expected job growth in September, the unemployment rate declined more than expected, dropping 0.4% to 4.8%. This wasn’t driven by the number of unemployed declining, as much as it was driven by a decline in the labor force. Relative to the pre-pandemic peak in December 2019, the civilian labor force has declined by 3.2 million people, and women represent a disproportionate majority of the decline, 2.0 million or 62% of the total.

The U-6 rate captures some of that impact by including people “marginally attached to the labor force” as well. For September 2021, the U-6 rate was 8.5% vs. the 4.8% headline unemployment rate. People marginally attached to the labor force are those who currently are neither working nor looking for work but indicate that they want and are available for a job and have looked for work sometime in the past 12 months (just not the last month). Discouraged workers, a subset of the marginally attached, have given a job-market related reason for not currently looking for work. The U-6 rate also accounts for those who are underemployed – who have settled for part-time work but want a full-time job.

Labor Force Participation Rates

In general, even pre-pandemic, the labor force participation rate – people in the labor force relative to the working age population – has been in decline due to the aging demographics of our country. A larger and larger portion of the population is entering retirement age, leaving the work force, but still a part of the population, and therefore lowering the labor force participation rate. Perhaps a more appropriate measure that removes this impact is the Employment-Population Ratio, for ages 25-54. This typically is between 75-80%, and currently sits at 78%.

Over the last 2 years, we saw first a sharp drop in the labor force participation rate that hasn’t recovered. For women, in particular, the labor force participation rate is now 57.1%, a rate not seen since the late 1980s.

Last month, after mostly steady gains throughout 2021, the labor force declined again – by 183,000 people. Men in the labor force actually increased for the month, while 309,000 women over the age of 20 left the labor force last month, resulting in a 0.3% drop in the labor force participation rate for women over 20 to 57.1%. This compares to a 70% participation rate for men over 20.

This translates to lower levels of employment today vs. the pre-pandemic December 2019 peak for women in almost every age category… but because they have not only left their jobs but left the labor force as well, it doesn’t translate to higher unemployment rates. In every age bracket, men have a higher reported unemployment rate than women, despite the fact that absolute employment levels for women are down more.

A potential explanation for this phenomenon? Despite the gains made in the work force, women remain primary caregivers in most households. And the pandemic has created a shortage in childcare and there is still a relatively unstable school situation. While schools are open, as a mother, I personally can attest to the fact that at any moment, the school can call and tell me my child has been exposed to Covid and needs to be home for as long as 10 days. In the last 2 weeks alone, I have received at least 5 Covid emails from my kids’ schools. None of the cases impacted my children, but they just as easily could have. And that’s not a stable, reliable situation you can count on to start a new job in. You can see this most clearly in the elevated unemployment rate for single women with families of 6.8% relative to that of married women at just 2.9%.

Anecdotally, I have heard from many mothers who left or lost their jobs during the pandemic and have yet to return due to needing to provide care for children. Some have lost parents to Covid who were also their childcare. Or overall childcare shortages have driven up the cost of childcare so much that it makes returning to work less economical for families.

Female-dominated industries, like healthcare and education, were also amont the first industries to implement vaccine mandates, which may also be contributing to labor force exits. As more major companies across industries announce mandates and deadlines in order to get ahead of President Biden’s proposed vaccine mandate, we may see a broader decline in the labor force in the coming months.

Other Demographic Variations in Unemployment

Other demographic factors – namely race and educational attainment – also result in differences in unemployment rates, which often become more pronounced in an economic downturn. Black and Hispanic workers have unemployment rates of 7.9% and 6.3%, 1.9x and 1.5x higher than the unemployment rate for White workers.

Educational attainment also drives dramatic differences in unemployment rates, which again become more disperate in downturns. Currently, college-educated employees have an unemployment rate of just 2.5%, which indicates a very tight labor market, while those without a high school diploma have unemployment rates more than 3x that, at 7.9%.

We are also currently seeing a fairly sizeable difference in unemployment rates geographically. Regional data comes in at a bit of a lag, so is only available through August, but the Northeast and West had unemployment rates of 6.6% and 6.5% vs. just 4.9% and 4.8% in the South and Midwest.

Composition of Unemployment

What does unemployment currently look like? As of September, 30% are reentrants, people returning to the labor force. Another 29% have suffered a permanent job loss and are looking for a new one. Just 10% have voluntarily left their job, and another 6% are brand new to the labor force.

We can also look at the duration of unemployent. Currently, there are 2.7 million people who have been unemployed for 6 months or longer. This number continues to decline, but is the one that has the potential for the most severe impact on economic productivity – long-term unemployment can lead to discouraged workers, people leaving the labor force all together, and long-term impacts on earnings potential.

We can also look at unemployment by industry. The highest unemployment rate still remains in those sectors most directly impacted by the pandemic, particulary Leisure & Hospitality (7.7% unemployment rate). In terms of people, the largest numbers of unemployed people are in Leisure & Hospitality (1.0 million) and Wholesale/Retail (1.1 million), followed closely by Businesses Services and Education and Health Services, which have 0.8 million unemployed each.

Impact on Wages

We remain 5 million jobs below pre-pandemic peak employment levels, and the labor force – those employed and those willing to work and actively looking for jobs – remains 3.2 million people short of pre-pandemic levels. Despite that, we know GDP, our measure of economic output, has surpassed prior peak levels.

We know there is a labor shortage – you can feel it in customer service levels, see it in the help wanted signs you see everywhere you go, and monthly JOLTS report (job openings and labor turnover) numbers confirm it. Job openings are at record numbers.

Related Post: What’s Up with the Labor Market?

That labor shortage is translating into higher wages for those willing to work. Over the last 12 months. hourly wages are up 5.5%, hours are up 0.3%, for average weekly earnings up 5.8% for nonsupervisory workers. This is good news for employees… but likely to also feed in to continued inflation, as businesses pass those cost increases along to consumers.

Related Post: Five Factors Driving Higher Inflation

Next Data Point?
October Employment Situation report will be released Friday, November 5th

Political Update: The Debt Ceiling and the $3.5 Trillion Spending Bill

Last week I updated you on the passage of a temporary budget measure to fund the government through early December. Congress has now done something similar with the debt ceiling. With the October 18th deadline looming (the date at which the government will run out of cash to pay its bills if they cannot issue more debt), last week the Senate reached an agreement on a temporary measure to raise the debt ceiling.

Republican Senators agreed to stand down and allow the measure to pass with a 50 to 48 vote (2 Republican Senators were absent). The bill allows for a $480 billion increase in the debt ceiling which should keep things funded through December 3rd. The measure passed the House of representatives this week.

This now sets a new deadling of December 3rd – for both raising the debt ceiling and passing the FY2022 budget.

$3.5 Trillion Budget Reconciliation Bill

The latest here is there finally seems to be some movement and acknowledgment that the price tag is just too high to pass as is… but last week things were relatively quiet on the Hill as to specific changes. Stay tuned this week as negotiations continue to see what’s in, what goes, and what tax changes get thrown out too.

Pandemic Update

Good news on the pandemic front continues. New cases are down over 42% since the start of September, with new daily deaths beginning to decline now as well. The rate of hospitalizations and deaths, relative to new cases, also continues to decline.

Vaccinations also continue to increase, albeit more slowly than last spring. Currently, over 76% of those over the age of 12 (the eligible population) have received at least 1 dose. I should also note the CDC is now also tracking and reporting booster shots.

The other big news on this front? The FDA and CDC are busy. FDA is currently reviewing booster authorization for Moderna and J&J vaccines, as well as Pfizer vaccines for ages 5-11, and the newly announced Merck treatment therapy for Covid. There is expected to be news on the boosters this week, and there is an FDA meeting scheduled for 10/26 to review the Pfizer vaccination for children under 12.

Next Data Point?
CDC tracks and reports pandemic data daily via the CDC Covid Data Tracker


This week in the markets, we will continue to watch the progress in Congress on the Senate’s budget reconciliation, aka the $3.5 trillion spending bill. On the economic front, there are a number of major releases:

  • Tuesday – August JOLTS (job openings, labor turnover and separations) report
  • Wednesday – Consumer Price Index for September (an inflation indicator)
  • Thursday – Weekly Jobless Claims
  • Friday – September Retail Sales (a leading indicator for consumer spending)

In addition to those, it’s also the start of Q3 earnings season – so look for movement in the stock market based on earnings surprises.

Questions about this week’s update or recent financial headlines? Tune in to Live Q&A with Family Finance Mom every Monday and Wednesday at 9AM ET on Instagram. Look for the question box in stories to leave your questions, or watch and ask them live.

Thank you for sharing!

About Meghan

Meghan spent nearly a decade as a Financial Analyst, before spending the last 7+ as a SAHM to three little ones. She shares simple money tips for moms to help your family reach your financial goals by building a financial plan you can LIVE with! You can learn more about her background in finance, catch her daily on Instagram and Facebook, and her weekly live discussions in her community for Family Finance Moms.

1 Comment

  1. Monday Market Update 10-18-2021 on October 20, 2021 at 7:46 pm

    […] market? The expectation was that it would encourage workers to return to the labor force… last week’s market update, shared the September Employment Situation which showed disappointing job gains, but is based on […]

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