Coverage: Job growth slows, but unemployment rate drops to 3.7%
U.S. job growth slowed sharply in September likely as Hurricane Florence depressed restaurant and retail payrolls, but the unemployment rate fell to near a 49-year low of 3.7 percent, pointing to a further tightening in labor market conditions.
Lucia Mutikani of Reuters had the news:
The Labor Department’s closely watched monthly employment report on Friday also showed a steady rise in wages, suggesting moderate inflation pressures, which could ease concerns about the economy overheating and keep the Federal Reserve on a path of gradual interest rate increases.
Nonfarm payrolls increased by 134,000 jobs last month, the fewest in a year, as the retail and leisure and hospitality sectors shed employment. Data for July and August were revised to show 87,000 more jobs added than previously reported.
The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population.
“The weaker gain in payrolls in September may partly reflect some hit from Hurricane Florence,” said Michael Pearce, senior U.S. economist at Capital Economics in New York. “There is little in this report to stop the Fed continuing to raise interest rates gradually.”
Heather Long of The Washington Post reported that September hiring was weak because of Hurricane Florence:
While economists cheered the unemployment rate, only 134,000 jobs were created in September, which was well below the consensus prediction of 180,000. Hurricane Florence, which brought catastrophic flooding to the Carolinas, probably prevented some businesses from bringing new workers on. Hiring was especially weak in retail and the leisure and hospitality sectors.
“We saw some evidence of hurricane impact in employment growth,” economists Joseph Song and Michelle Meyer of Bank of America Merrill Lynch wrote in a note to clients. “Leisure and hospitality was down 17,000, which is a big shift from the trend of approximately 20,000 gains per month. Moreover, retail trade was down 20,000 which could be partly weather related as consumers and businesses hunkered down for the storm.”
Economists continue to be surprised that wages are not growing faster now that competition for workers is so fierce. Annual pay for the average worker increased only 2.8 percent in the past year.
Gwynn Guilford of Quartz examined why so many people remain out of work:
The US seems to be hitting the climax of this economic cycle. Normally, that ought to mean a swift pickup in wages. Back in 2007 and 2000, earnings were growing at a brisk clip of more than 4%, notes Patrick Chovanec, economist at Silvercrest Asset Management. Wage growth is still considerably below that rate.
Other things we’d normally expect to see are also noticeably absent. For example, it would make sense to see more people in their prime working years(between the ages of 25 and 54) with jobs when the labor market appears so tight. However, the employment-to-population ratio for this group is conspicuously feeble. In September, only 79.3% of working-age Americans had jobs. That’s a smaller share than the final months of the last cycle, which ended in 2007—and way down from the late 1990s and early 2000s.
Part of the problem is that many of them seem to have exited the workforce—meaning, that they’ve given up looking for work. While the share of prime-age Americans in the labor force ticked up ever so slightly in September, to 82%, that’s still well shy of the share before the Great Recession, when it was above 83%. And it’s starkly lower than in 2000, when more than 84%of prime-age Americans were working.