Jobless rate in U.S. drops to lowest level since July 2008
Wages fail to keep up with improved hiring
• U.S. employers stepped up hiring in September and the jobless rate fell to a six-year low, which could bolster bets on a Federal Reserve rate hike in mid-2015 or even earlier.
Friday’s report on hiring is the most significant gauge of the economy’s health ahead of Nov. 4 congressional elections.
While President Barack Obama’s message of an improving economy has been hampered by persistent drops in family incomes under his watch, the hiring data underscored the strides made in the labour market this year.
U.S. non-farm payrolls rose by 248,000 last month and the jobless rate fell two-tenths of a point to 5.9%, the lowest since July 2008, the Labor Department said. The results showed a stronger labour market than analysts had anticipated.
The government also said 69,000 more jobs had been added to payrolls in July and August than previously estimated.
“What we see is a measured con- fidence. The business sector is now much more likely to hire even before there is a fall in their inventories,” Patrick O’Keefe, an economist at CohnReznick and a former U.S. Labor Department official, said ahead of the report.
There were some downsides in the report. Notably, part of the decline in the unemployment rate was because workers left the labour force. The share of the population with jobs or hunting for one fell to 62.7%, itws lowest level since 1978.
That rate has declined in recent years as more workers have retired and as people have given up job hunts due to a weak economy.
Still, a measure of unemployment that partially takes into account worker discouragement — which the government calls the U-6 rate — fell last month to 11.8%, its lowest since October 2008.
Most economists see the economy expanding at around a 3% annual rate in the third quarter, well above the average over the last two years of 2.2%.
But solid economic growth and hiring is insufficient for the Fed to initiate an early interest rate increase. Several officials at the U.S. central bank have expressed concern in recent weeks that inflation remains too low, a sign that a significant amount of slack remains in the economy.
“From our perspective, wages matter much more than head count,” economists at RBC said in a note to clients ahead of the report.
Average hourly earnings i ncreased a modest 2.0% in September from a year earlier. Before the 2007-09 recession, wages rose at a much faster rate. The length of the average work week rose to 34.6 hours. Fed policy-makers will scrutinize the data as they prepare for a policy meeting on Oct. 28-29.