US payrolls post modest rise in September

As the Fed decides how soon to raise interest rates, the increase in jobs in September was the smallest since May.

Federal Reserve Board Chair Janet Yellen. Picture: AP Photo/Pablo Martinez Monsivais.

The US economy delivered modest job growth in September as the presidential campaign enters its final stretch and the Federal Reserve grapples with whether to raise interest rates.

Employment outside of farms grew by 156,000 jobs in September, the Labor Department said Friday. That was the smallest gain since May, though it was a level that, if sustained, would deliver enough jobs to keep up with a growing population.

The unemployment rate, derived from a separate survey of households, increased a tenth of a percentage point to 5.0 per cent. But, the rise occurred because the overall pool of workers, both the employed and the unemployed, grew. The labour force swelled by 3 million workers over the past year, the biggest gain since 2000. The labour-force participation rate remains historically low but grew by half a point over the past year to 62.9 per cent.

The figures suggest that while the labour market has cooled from last year, it has been strong enough to draw in many Americans who previously have been too discouraged to look for work. Meanwhile, wages grew 2.6 per cent over the past year, an acceleration that suggests employers are being forced to compete more vigorously over prospective employees.

“The US economy, though slowing, continues to generate a healthy number of jobs,” Sung Won Sohn of California State University, Channel Islands, said in a note to clients. “

As the economy approaches full employment, employment gains will become harder to come by.”

Harry Holzer, a Georgetown University professor and former chief economist at the Labor Department, said the report “a labour market that continues to make slow but steady improvements and is gradually tightening,”

The main details of the report fell below Wall Street expectations of a 170,000 gain in payrolls and a 4.9 per cent jobless rate.

But faster growth in workers’ wages points to a firming market. Private-sector workers earned, on average, $US25.79 an hour in September, up 6 cents, or 0.2 per cent, from a month earlier. The average paycheck grew 2.6 per cent over the past year.

The report provides one of the final major snapshots of the economy before the Nov. 8 presidential election. Steady job growth has boosted the approval rating of President Barack Obama and has been cited by Hillary Clinton as she urges voters to keep Democrats in control of the White House. Her Republican challenger, Donald Trump, has pointed to high underemployment and modest economic gains among blue-collar workers in arguing for change.

The latest figures are also likely to weigh on officials at the Fed, who have suggested they are inclined to raise interest rates once by year end. The central bank has kept rates exceptionally low since the recession to spur economic growth by encouraging households and businesses to spend and invest. But Fed officials worry that keeping rates too low for too long increases the risk of creating asset bubbles.

The Fed meets twice more this year — in early November and mid-December — and is looking for signs that the labour market is tightening and, thus, strong enough to withstand higher interest rates.

Among the measures the central bank is looking at is the unemployment rate. The rate is within the 4.7 per cent to 5 per cent range that the Fed projects will be the economy’s long-run average, or the point at which the labour market can grow without stoking a surge in inflation. But the rate would be higher had millions of working-age Americans not fallen out of the labour force in recent decades.

Some are now filtering back in after a long run of job growth.

The labour force — the number of adults who hold jobs or are actively looking for them — grew by 444,000 last month and by slightly more than 3 million over the past year.

The labour-force participation rate — the share of the overall population in the labour force — stood at 62.9 per cent in September, up a tenth of a percentage point from August and a half-point from a year earlier. It is still hovering near the lowest level since the late 1970s, in part due to the retirement of Baby Boomers but also because many working-age Americans have given up the job search.

Even with the latest progress, millions of Americans are underemployed. The share of residents who are jobless, involuntarily stuck in part-time work or too discouraged to look for a job stood at 9.7 per cent last month, unchanged from August, but down from 10 per cent a year earlier.

The average workweek last month increased a tenth of an hour to 34.4 hours.

A broad array of industries added jobs last month. Professional and business services rose by 67,000. Healthcare jobs increased by 33,000. Food service jobs grew by 30,000. Retailers added 22,000.

Meanwhile, employment in the mining sector, which includes oil and natural gas industries, was flat over the month after falling sharply over the past two years. Manufacturing employment fell by 13,000.

The government slightly revised job gains for August and July, though the overall picture didn’t change. Job growth averaged 192,000 over the past three months, up from 146,000 in the second quarter while roughly matching the pace of the first quarter. Job growth this year has cooled from last year’s robust pace of 229,000.

While the labour market has grown solidly in recent years, the economy as a whole has underperformed this year. Gross domestic product — the broadest measure of goods and services produced across the US — grew at an annual rate of just above 1 per cent in the first half of the year. That is far slower than the average growth of 2.1 per cent during the current expansion, which itself is the weakest of any period of growth since 1949.

Economists project GDP grew at a rate of between 2 per cent and 3 per cent in the third quarter. The government releases an initial estimate of third-quarter GDP later this month.

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