U.S. employers hired 136,000 additional workers last month on net and wage growth slowed considerably rising only 2.9% over the year. Notably, private sector employment growth was weaker, growing only 114,000 in September with outright declines in both manufacturing and retail. Much of the public sector employment occurred at the state and local level and was not a result of additional Census hiring.
The unemployment rate fell to 3.5% from 3.7% in August. This is the lowest unemployment rate in 50 years. The labor force participation rate held steady at 63.2%, where it started the year. At the same time, the employment-to-population ratio rose by 0.1 percentage points. Taken together, this means that the unemployment rate fell for the right reasons as more people in the labor force got jobs.
The most disappointing news in today’s report is slowing nominal wage growth. Nominal wages rose 2.9% year-over-year in September, which is slower than expected in an economy that has had historically low unemployment—the unemployment rate has been at (or below) 4.0% for the past 19 months. There’s a chance the recent low of 2.9% is a blip, but it’s certainly a troubling sign and something to watch in coming months especially after the deceleration experienced in the first half of 2019.
The report suggests the Federal Reserve is doing the right thing by gradually lowering interest rates to ensure the longest recovery in modern economic history can be sustained—rather than peter out just as many lower- and middle-income households are starting to feel its benefits.