United States: Unemployment rate falls to near 50-year low in September despite softening payroll growth
October 5, 2018
The September employment report showed the U.S. economy adding jobs at a solid pace, although much slower than in previous months. Non-farm payrolls increased by 134,000 in September, markedly under market analysts’ expectations of 180,000. However, the report indicates that August payroll numbers were revised significantly upwards, from an already robust 201,000 to a very strong print of 270,000. September represents the 96th consecutive month of job creation, the longest streak on record in the U.S. economy. Although September payrolls could suggest the economy is cooling somewhat, these preliminary numbers can be subject to significant revisions.
Looking at sectoral payroll data, it appears that job growth in September was solid in the industrial sector, with manufacturing, mining and construction all posting significant gains. Manufacturing, particularly, performed above expectations after a disappointing print in August. Meanwhile in the service sector, job growth continued to be notably strong—albeit slightly softening—in professional and business services. On the other hand, payroll gains markedly slowed in September for education and health services, following a good print in August. Additionally, both retail trade, and leisure and hospitality shed jobs in the month.
The unemployment rate meanwhile fell from 3.9% in August to 3.7% in September, the lowest level recorded since 1969. This was largely due to the revision of August’s data, as well as a sharp increase in the number of persons not in the labor force in recent months—more than 750,000 between July and September. Regarding earnings, the data shows wage pressures seem to remain quite steady. Average hourly earnings increased 0.3% month-on-month, matching both August’s revised print and analysts’ expectations. In year-on-year terms, average hourly earnings increased 2.8% in September, slightly under expectations as well as August’s print, both at 2.9%.
Overall, the implications of the September payroll data for monetary policy give credence to the scenario of steady rate hikes from the Fed in coming quarters. Indeed, wage pressures do not show signs of spiraling out of control, while employment gains remain broadly steady and the number of people looking for work continues to fall month after month.
United States Unemployment Rate Forecast
FocusEconomics Consensus Forecast panelists expect the unemployment rate to average 3.9% in 2018. For 2019, the panel sees the unemployment rate dropping to 3.6%, which is unchanged from last month’s forecast.
Author: Joffrey Simonet, Economist