​Unemployment Falls to 3.5 Percent in September

Wage growth goes negative

Roy Maurer By Roy Maurer October 4, 2019
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The nation's unemployment rate dropped to 3.5 percent in September, the lowest in over 50 years and the 19th consecutive month at or below 4 percent. The number of unemployed decreased by 275,000 to 5.8 million and U.S. employers added 136,000 jobs last month, according to the latest Bureau of Labor Statistics (BLS) report. 

With unemployment reaching a 50-year low and prime-age employment rising again this month, the economy continues to draw workers off the sidelines despite recession fears, according to Julia Pollak, a labor economist at employment marketplace ZipRecruiter.

"The U.S. labor market remains resilient and continues to create new opportunities for Americans despite slowing global growth and the introduction of new tariffs on Sept. 1," Pollak said. "Continued job growth is still drawing workers off the sidelines, even this late in the economic recovery."

Michael Stull, senior vice president at staffing and recruiting firm Manpower North America, noted that skilled workers have the edge in this jobs market, as "demand is largely outpacing talent supply across the U.S., more jobs are being added, and unemployment is at lows last seen since the first lunar landing."

The latest BLS employment snapshot pushes recession risk back a bit, said Josh Wright, chief economist for recruitment software firm iCIMS. "The unemployment rate usually rises ahead of a recession, so a fresh decline pushes out the timeline for any potential recession into late 2020 at the earliest," he said. "That's barring any major negative shocks, of course, but the bar is getting higher for the size of a recession-worthy shock."

The employment-to-population ratio for workers aged 25-54 continued to climb to 80.1 percent, following an increase the previous month, and the prime-age employment rate for women ticked up in September to 74 percent, its highest point since 2001.

"It is now within one percentage point of its all-time high," Pollak said.

The report shows the lowest unemployment rates on record for blacks (5.5 percent), Hispanics (3.9 percent), people with disabilities (6.1 percent) and people without a high school diploma (4.8 percent).

The U-6 unemployment rate—a broader measure capturing both the unemployed, underemployed and those too discouraged to seek work—continued its long decline, falling to 6.9 percent, its lowest point since 2000. The number of long-term unemployed (those jobless for 27 weeks or more) rose however, from 1.2 million to 1.3 million in September and accounted for 22.7 percent of the unemployed.

The labor force participation rate was unchanged at 63.2 percent and the employment-population ratio moved up by 0.1 percentage point to 61.0 percent. "Both numbers have been trending up slightly over the last few months, running against demographic headwinds to indicate that there are still workers for employers to draw in off the sidelines, said Daniel Zhao, Glassdoor senior economist.

Payroll Gains

The BLS report shows that hiring is slowing down. "Through September this year, average job growth is at 161,000 per month, down considerably compared to 220,000 last year," said Nick Bunker, a Washington, D.C.-based economist at the Indeed Hiring Lab. "Trends suggest the slowdown is due to weaker demand from employers," he said. "The loss of momentum does appear to be affecting other parts of the labor market, as rates of long-term unemployment and involuntary part-time work remain stubbornly high."

Private-sector employment growth was weaker than expected (114,000 jobs added in September), pointed out Elise Gould, senior economist at the Economic Policy Institute based in Washington, D.C. "Much of the public-sector employment occurred at the state and local level and was not a result of additional Census hiring," she added.

Zhao called the job gains "respectable"—below the 2019 average but still above what's needed to keep up with population growth. "Crucially, August's payrolls added were revised up from 130,000 to 168,000, a gain that reverses some of the pessimism about the labor market slowdown following last month's report," he said.

Health Care Carries the Load, Manufacturing Gets Softer

The overall composition of jobs was encouraging, Wright said. Job gains in September were led by the health care industry (39,000 new jobs), professional and business services (34,000), which includes many technology jobs, government (22,000) and transportation and warehousing (16,000).

"At ManpowerGroup, we saw earlier than normal hiring in transportation and warehousing fueled by e-commerce," Stull said. "Consumer confidence remains strong as we head into the holiday season and we anticipate employers will start to boost retail hiring for seasonal jobs. Given the tight labor market, employers are looking to new pockets of talent to fill demand and increasingly offering non-wage benefits including flexibility and remote working."

By contrast, retailers shed 11,400 jobs, mostly in clothing stores, as the shift to online shopping continues. Since reaching a peak in January 2017, the retail sector has lost 197,000 jobs.

But the most worrying figure in the report is the months-long decline in manufacturing employment (-2,000 jobs in September), Pollak said. "In 2018, manufacturing workers saw their opportunities expand and their wages rise," she said. "Many negotiated new contracts raising pay and benefits for new hires and eliminating the two-tier system that paid them less than grandfathered employees. In 2019, by contrast, manufacturing workers are worrying about the prospect of pink slips."

Glassdoor's Job Market Report showed a 15 percent drop in manufacturing job openings in September as the manufacturing sector grapples with the effects of the trade war, Zhao said.

Stull noted that "the reality is that the number of manufacturing jobs we have open to fill outpace the number of candidates, conducive with a 50-year low unemployment rate," and that "across all industries, we continue to see employers hiring, and softening in manufacturing cannot be our sole indicator of the pulse of the labor market."

Wage Drop Surprise

The drop in average hourly earnings over the last month took many economists—used to anemic but steady monthly increases—by surprise. Wages fell by 1 cent to $28.09 in September, after rising by 11 cents in August.

"Nominal wages rose 2.9 percent year-over-year in September, which is slower than expected in an economy that has had historically low unemployment," Gould said. "There's a chance the recent low of 2.9 percent 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."

Broken out from the total, wages rose for nonmanagerial workers by 4 cents to $23.65.

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