The unemployment rate fell in September to the lowest level since the Vietn

Our research director Sandy Peterson sent us this this morning: 

Straight from the Wall Street Journal.

WASHINGTON—The unemployment rate fell in September to the lowest level since the Vietnam War while hiring cooled slightly, the latest signs of an extremely tight labor market.

The unemployment rate fell to 3.7% from 3.9% in August, the lowest rate since December 1969, the Labor Department said Friday.

U.S. nonfarm payrolls rose a seasonally adjusted 134,000 in September, the smallest gain in a year and a possible sign employers are starting to struggle to fill jobs. Wages increased last month and advanced 2.8% from a year earlier.

Economists surveyed by the Wall Street Journal had expected 180,000 new jobs and a 3.8% unemployment rate.

The Labor Department said it’s possible that employment in some industries was affected by Hurricane Florence, which struck the Carolinas last month. But the department couldn't quantify the impact. It said response rates to September surveys were within normal ranges.

Revised figures show employers added 270,000 jobs in August and 165,000 in July, a net upward revision of 87,000. Through the first nine months of the year, employers added an average of 211,000 workers to payrolls each month, well outpacing 2017’s average monthly growth of 182,000. That runs counter to economists’ expectation for hiring to broadly ease as the labor market tightens. U.S. employers have added to payrolls for 96 straight months, extending the longest continuous jobs expansion on record.

Last month, 150,000 Americans entered the labor force, keeping the share of American adults working or looking for work steady at 62.7%.

While unemployment is historically low, the labor-force participation rate is just above multidecade lows. The rate is up slightly from a recent low of 62.3% in 2015, but still near the smallest share of adults participating since the late 1970s, a time when women were still entering the workforce in greater numbers.

A relative abundance of Americans on the sidelines is one factor economists point to for modest wage growth despite a record-high level of job openings and an improving broader economy.

Average hourly earnings for all private-sector workers increased 8 cents last month to $27.24. That is fairly strong wage growth for the month, but still didn’t cause hourly earnings to advance at least 3% on the year. That’s in part because a year ago in September wage gains were unusually strong due to hurricanes Harvey and Irma causing low-wage workers to miss work, and drop out of the calculation. Hurricane Florence may have had some similar effect, but for a smaller number of employees.

Wages haven’t increased at better than a 3% rate from a year earlier since the recession ended in 2009. And the last time unemployment was similarly low, in the early 2000s and late 1960s, wages for nonsupervisors were growing at a 4% or better annual pace.

But wage gains have accelerated recently compared with earlier in the expansion, and separate Labor Department data shows wages grew more rapidly in the past year for low-wage earners and those who didn’t complete high school. Those are indications of a tighter labor market benefiting those who faced much tougher jobs prospects only a few years ago.

Last week, a chain of gourmet sandwich shops abruptly closed in the Washington, D.C., region. Two days later, a former competitor, Cava Group Inc., held job fairs nearby for displaced workers.

“We knew a group of workers would be immediately seeking an opportunity,” said Cava Chief Executive Brett Schulman. “We wanted to mitigate that situation, help them get on pathway to a great career, and tell them ‘We need you.’”

Cava has raised its and offers benefits including health insurance and a free meal with every shift to help attract and retain workers. About half of the 50 workers who attended the fairs were offered follow-up interviews. At least five have already been hired by Mediterranean chain.

The solid jobs report likely keeps the Federal Reserve on track to gradually lift its benchmark interest rate. The Fed raised its benchmark federal-funds rate last week to a range between 2% and 2.25%, and most officials signaled they expected to lift rates by another percentage point through next year. In a speech earlier this week, Fed Chairman Jerome Powell suggested he sees little urgency to accelerate the central bank’s pace of interest-rate increases or to signal a more restrictive policy path ahead.

“Removing accommodation too quickly could needlessly foreshorten the expansion,” Mr. Powell said. “Moving too slowly could risk rising inflation and inflation expectations.” He said the Fed’s gradual path “is designed to balance these risks.”

Friday’s report showed the manufacturing, construction and health-care sectors added jobs last month. Retail and leisure and hospitality, two sectors that can be susceptible to bad weather, lost jobs. All levels of government added 13,000 jobs from public payrolls last month.

The broadest measure of unemployment, including those too discouraged to look for work, plus Americans stuck in part-time jobs but who want to work full-time, rose to 7.5% from 7.4% the prior month. That rate, known as the U-6, remains somewhat elevated compared with the last time unemployment was similarly low.

Michael Berry

Michael Berry

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