School hires drop, labor shortages hamper U.S. job growth in September
- Non-farm payroll increases by 194,000 in September
- The private wage bill increases by 317,000; government down 123,000
- Unemployment rate drops to 4.8% from 5.2% in August
- Average hourly earnings increase by 0.6%; week of work
WASHINGTON, Oct. 8 (Reuters) – The US economy created the fewest jobs in nine months in September amid declining school hires and a labor shortage, but declining cases of COVID-19 and the end of generous unemployment benefits could boost employment gains in the coming month.
Although the Department of Labor’s closely watched employment report on Friday showed the unemployment rate falling to an 18-month low at 4.8%, this was in part due to people leaving the workforce. . But there were signs of strain on the job market. Wage gains accelerated further, permanent job losses declined and fewer people experienced long spells of unemployment.
“The biggest problem isn’t that growth has slowed, it’s that people are still afraid of going back to work,” said Brad McMillan, investment manager for the Commonwealth Financial Network.
The establishment survey showed that the non-farm payroll increased by 194,000 jobs last month. Data for August has been revised to show 366,000 jobs created instead of the 235,000 previously reported. Employment is 5.0 million jobs below its peak in February 2020.
Economists polled by Reuters predicted the wage bill would increase by 500,000 jobs, with estimates ranging from 700,000 jobs to 250,000. The 4.8% unemployment rate fell four-tenths of a percentage point from the month in August, while the average hourly wage rose 0.6% from 0.4% in August. The average work week also lengthened from 0.2 hours to 34.8 hours.
Job gains were limited by a 161,000 drop in state and local government payrolls. Private education jobs fell by 19,000. Most back-to-school hires typically take place in September, but last month’s hiring was below normal, leading to a decline after removing fluctuations seasonal data. The pandemic-related staff fluctuations in education have distorted normal seasonal patterns, making it difficult to interpret the data, the government said.
The decline in public education jobs resulted in a reduction of 123,000 government jobs. This was offset by a 317,000 increase in private wages.
Leisure and hospitality employment increased by 74,000 in September, as hiring in restaurants and bars rose by 29,000. Professional and business services payrolls also rose. Retailers hired 56,000 workers, while manufacturers added 26,000 jobs. The construction payroll increased by 22,000 jobs.
With wage inflation rising, September’s meager payroll gains are unlikely to deter the Federal Reserve from starting to scale back its massive monthly bond buying program this year.
The US central bank signaled last month that it could start cutting back on asset purchases as early as November. Economists expect the announcement to come at the policy meeting on November 2-3.
“The bar has always been low enough that a reduction in asset purchases is announced in November and the combination of upward revisions, falling unemployment rates and signs of a tightening labor market are expected to be more than respect it, ”said Andrew Hollenhorst, chief US economist at Citigroup in New York.
The likelihood of a cut was bolstered by the US Senate agreeing to increase the Treasury Department’s borrowing power through December on Thursday. Read more
Stocks on Wall Street were mixed in choppy trading. The dollar (.DXY) slipped against a basket of currencies. US Treasury prices have fallen.
Despite the modest gain in jobs, the acceleration in wage growth bodes well for the economic outlook, after an apparent sharp slowdown in growth in the third quarter.
The economy slowed in the last quarter due to the summer spike in coronavirus cases, a ebb in the flow of government pandemic relief money, a scarcity of manpower and commodities, which weighed on motor vehicle sales.
The Atlanta Fed estimates that gross domestic product growth slowed to an annualized rate of 1.3% during the July-September quarter. The economy grew at a pace of 6.7% in the second quarter.
But with COVID-19 infections declining and schools fully reopening for in-person learning, more people should be able to re-enter the workforce. In the coming months, the workforce squeeze could ease after federally funded benefits expire in early September.
These expanded benefits have been blamed by businesses and Republicans for failure to fill a record 10.9 million job openings at the end of July. So far, many unemployed people do not seem in a hurry to start looking for a job, having saved some of their government money.
The smallest household survey from which the unemployment rate is derived showed that 183,000 people left the labor force in September. As a result, the labor force participation rate, or the proportion of working-age Americans who have or are looking for a job, fell to 61.6% from 61.7% in August.
Some economists say a significant portion of those who dropped out of the workforce have retired, thanks to a strong stock market and record hikes in house prices, which have boosted household wealth. Self-employment has also increased.
“Labor supply remains a significant constraint and an issue that may very well not be resolved in the short term,” said Ellen Zentner, chief US economist at Morgan Stanley in New York.
Although participation remains low, some aspects of the labor market are improving. The employment-to-population ratio, seen as a measure of an economy’s ability to create jobs, rose to 58.7% from 58.5 in August.
The number of long-term unemployed fell from 496,000 to 2.7 million in September. They represented 34.5% of the 7.7 million officially unemployed, against 37.4% in August. The median duration of unemployment fell to 13.3 weeks from 14.7 weeks in August.
Reporting by Lucia Mutikani Editing by Chizu Nomiyama and Paul Simao
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