Unemployment falls to 49-year low
Unemployment fell to a nearly 50year low in September even as employers added a disappointing 134,000 jobs amid increasing worker shortages and possible effects from Hurricane Florence.
The unemployment rate fell from 3.9 percent to 3.7 percent, lowest since December 1969, the Labor Department said Friday. The rate is calculated from a separate survey of households than the job growth figure.
Economists had estimated 185,000 new jobs were created last month, according to a Bloomberg survey.
Goldman Sachs expected the hurricane to reduce employment by 33,000 in the Carolinas. But Morgan Stanley said the storm likely affected too limited of an area and struck too late during the week of Labor’s survey to have a meaningful impact. Workers are counted as employed as long as they show up for any part of their pay period.
Yet employment in leisure and hospitality, which includes hotels and restaurants, fell 17,000 last month, suggesting the storm was a factor.
“The headline payroll number is a weather story,” Ian Shepherdson, chief economist of Pantheon Macroeconomics, wrote in a note to clients.
The number of workers across the country who stayed home because of weather increased by 276,000 last month on a non-seasonally adjusted basis, compared to a median 7,000 rise over the past 10 September jobs report, says Jim O’Sullivan, chief U.S. economist of High Frequency Economics.
Still another wrinkle is that Labor tends to undercount September employment in its initial estimate and revise it up later, O’Sullivan says.
On the positive side, payroll increases for July and August were revised by a total 87,000. July’s gain was raised from 147,000 to 165,000 and August’s from 201,000 to 270,000. That largely offsets the weak September showing.
Meanwhile, the labor market faces other challenges. Businesses are having a harder time finding qualified job candidates. Many analysts expect the crunch to slow hiring in the months ahead despite strong economic growth.
And a new Trump administration tariff on $200 billion in Chinese imports – along with China’s retaliation against US imports – took effect last month, hitting many consumer goods. That has dinged business confidence and could curtail hiring.
So far, job growth has been surprisingly strong this year despite the hurdles, averaging about 200,000 a month, up from 182,000 in 2017.
Average hourly earnings rose 8
cents to $27.24, lowering the annual gain to 2.8 percent from a nine-year high of 2.9 percent in August.
Goldman said the hurricane may have artificially inflated hourly earnings by trimming many workers’ hours without necessarily reducing their pay. Over the longer term, faster pay increases could lead the Federal Reserve to raise interest rates more briskly to prevent a spike in inflation. That could spook markets by shifting investments from bonds to less risky interest-paying bonds.
Professional and business services led the job gains with 54,000. Health care added 30,000; transportation and warehousing, 24,000; construction, 23,000; and manufacturing, 18,000.
The unemployment rate for AfricanAmericans fell sharply for the second straight month, from 6.3 percent to 6 percent, the second lowest on record behind May’s 5.9 percent. The worker shortages are giving more opportunities to blacks and other disadvantaged groups that have had a tougher time finding jobs.
The Fed is likely to shrug off the disappointing jobs total, especially with unemployment falling to a nearly 50year low, and raise its key rate in December for a fourth time this year. Tumbling unemployment should put further upward pressure on wages and prices, and the Fed is trying to prevent a surge that weighs on middle-class U.S. households.
Besides the 17,000 job losses in leisure and hospitality, retailers, which are struggling as shoppers increasingly buy products online, shed 20,000 jobs.