September unemployment rate down to 5.9%

In September, the private sector created 248,000 new jobs, bringing the unemployment rate down by 0.2 of a percentage point to 5.9%, according to data published on Friday by the Bureau of Labor Statistics, part of the Department of Labor. Strong gains were reported in the professional and business services, retail trade and health care sectors.

Economists were relieved with the September report after August’s disappointing figures.

The number of unemployed Americans fell by 329,000 to 9.3 million in September versus August. Compared to September 2013, the unemployment rate fell by 1.3 percentage points, meaning there were 1.9 million fewer people out of work.

The average monthly gain over the last 12 months was 213,000 new jobs.

Professional and business services registered 81,000 new jobs in September, while employment services added 34,000, management and technical consulting services increased by 12,000, and architectural and engineering services rose by 6,000. Legal services posted a -5,000 decline.

Unemployment among the major worker groups at the end of September stood at:

• Adult men: 5.3%

• Adult women: 5.5%

• Whites: 5.1%

• Blacks: 11%

• Hispanics: 6.9%

• Asians: 4.3%

• Teenagers: 20%

(Data Source: Bureau of Labor Statistics)

The number of people out of work for more than 27 weeks, i.e. long-term unemployed, remained essentially unchanged in September, at 3 million. Long-term unemployment represents 31.9% of the total. Since September 2013, the number of long-term unemployed Americans has fallen by 1.2 million.

Secretary Perez encouraged by September’s figures

Regarding September’s employment situation, US Secretary of Labor, Thomas E. Perez said he was encouraged by the addition of 248,000 new jobs, the 55th successive month of private-sector employment creation.

Secretary Perez added that over the past 55 months, the private sector in the United States has created 10.3 million new jobs. This year has been the most robust for job creation since 1998.

Secretary Perez said:

“Over the last year, there are 811,000 fewer people working part time for economic reasons. Hispanic unemployment now stands at 6.9 percent, a full two-percentage-point drop from a year ago. Hispanic poverty is also down significantly. And in 2013, overall childhood poverty had its largest year-to-year decrease since 1966.”

“Things are unquestionably moving in the right direction, but we can do even better. The Labor Department and the Obama administration are working harder than ever not just to create more jobs and accelerate growth, but to strengthen the middle class and build an economy that works for everyone. Just this week, the Labor Department awarded more than $450 million to help community colleges train workers for the jobs of the 21st century – a bold long-term investment in our skills infrastructure similar to President Eisenhower’s interstate highway investment in our physical infrastructure nearly 60 years ago.”

America has come a long way since six years ago, when the economy nearly collapsed, Secretary Perez concluded.

But wage growth stays stubbornly weak

With declining unemployment and strong new job creation, many economists cannot explain why wages are not rising. Poor wage growth means there is still some slack in the labor market, which does not makes sense if unemployment is now at 5.9%.

While inflation has been low, payrolls have barely kept up over the last few years. For the past two months, the average hourly pay for non-management employees has been stuck at $20.67.

Households’ increases in income shape their budgets. More than 70% of economic activity in the United States depends on household spending.

The Federal Reserve will be watching this enigma carefully as it decides when to raise interest rates. With wage growth low, it will likely wait a while before considering any change in policy.

Some economists say unemployment needs to fall by another percentage point before wage growth starts to rise.

The UK and the US find themselves in nearly identical situations – strong GDP expansion, falling unemployment and low wage growth. In both countries, the doves and hawks in the central banks are beginning to disagree more strongly. In the last two meetings of the Bank of England’s Monetary Policy Committee, for the first time in four years there was no unanimity regarding interest rates.

In an email to Market Business News, James Chen, Chen Chief Technical Strategist at CITYINDEX, said the number of new jobs created was much greater than analysts had expected. The figures sparked a further rise in US stock index futures.

Financial Times Video – US September Jobs Report

Michael Mackenzie, Financial Times’ US markets editor, talks to FT ALphaville US editor Cardiff Garcia about September’s jobs report and its implications for monetary policy.