Washington, Oct. 8 (BUS) – The US economy created the fewest jobs in nine months in September amid a drop in school hiring and a shortage of workers, but the waning of COVID-19 cases and the expiration of generous unemployment benefits could boost employment gains in the coming months.
Although the closely watched Labor Department employment report on Friday showed the unemployment rate fell to an 18-month low of 4.8%, that was in part due to people leaving the labor force. With workers still scarce, wage gains accelerated, Reuters reports.
“The problem appears to be the supply of labor,” said Brad MacMillan, chief investment officer at Commonwealth Financial Network. “The biggest problem isn’t slower growth; it’s that people are still afraid to go back to work.”
Nonfarm payrolls rose by 194,000 jobs last month. August data was revised to show that 366,000 jobs were created instead of the previously reported 235,000. Employment is 5.0 million jobs below its peak in February 2020.
Economists polled by Reuters had expected a 500,000 job increase, with estimates ranging from 700,000 to 250,000. The unemployment rate fell 4.8% by four-tenths of a percentage point, while average hourly earnings rose 0.6%.
Employment gains were constrained by a 161,000 drop in state and local government payrolls. Special education jobs decreased by 19,000. Most back-to-school hiring usually occurs in
September, but employment last month was lower than usual, leading to a decline after removing seasonal volatility from the data.
The government said pandemic-related employment fluctuations in public and private education have distorted normal seasonal patterns, making the data difficult to interpret.
Overall, government payrolls fell by 123,000 jobs last month. This was offset by an increase of 317,000 in private jobs.
Employment in leisure and hospitality rose by 74,000 in September, but employment in restaurants and bars was little changed for the second month in a row. Professional and business services payrolls have increased by 60,000 jobs. Retailers employed 56 thousand workers while manufacturing added 26 thousand jobs.
The September employment report is the only report available before the Federal Reserve policy meeting on November 2-3. The US central bank signaled last month that it might start reducing its monthly bond purchases as soon as November.
Federal Reserve Chairman Jerome Powell told reporters that it would “take a reasonably good business report” to meet the central bank’s threshold to reduce its massive bond-buying program.
With wages rising, it is likely that the small gains in payrolls in September will not prevent the Federal Reserve from reducing its bond purchases.
US stocks opened higher. The dollar fell against a basket of currencies. US Treasuries were mixed.
The modest rise in jobs could dampen expectations of a rapid acceleration in economic growth after the sharp slowdown evident in the third quarter. The labor market and the economy are still constrained by the shortage of workers and raw materials caused by the pandemic.
The economy hit a speed bump in the third quarter, due in part to a summer outbreak of coronavirus cases, a slump in the flow of pandemic relief money from the government and a scarcity of raw materials, hurting auto sales.
The Federal Reserve Bank of Atlanta estimates that GDP growth fell to 1.3% at an annual rate in the July-September quarter. The economy grew at a pace of 6.7% in the second quarter.
But there is hope. COVID-19 infections are declining in the United States, with an average of 100,815 new infections reported each day, according to a Reuters analysis of data from state and local governments, as well as health authorities.
Schools have fully reopened for personalized learning, which is expected to enable more people, especially women, to join the workforce. In the coming months, business pressure could ease after benefits funded by the federal government expire in early September.
Extended Benefits, which provided unemployment checks to people ineligible for regular state unemployment benefits, has been blamed by companies and Republicans for a shortage of workers.
There were 10.9 million record jobs as of the end of July. But it seems that many of the unemployed have stashed some money from the government and are therefore in no hurry to start looking for jobs.
The labor force participation rate, or the proportion of working-age Americans who have or are looking for a job, hardly buds even as about 25 states led by Republican governors end extended benefits in the summer.
Some economists say a large portion of the people who dropped out of the workforce have retired, thanks to a strong stock market and record house price gains, boosting families’ wealth. Self-employment also increased.