Surge in hiring drives U.S. unemployment down to lowest level in six years
October 6, 2014 by Christopher S. Rugaber The Associated Press
A surge in hiring last month helped drive the United States’ unemployment rate down to a six-year low of 5.9 per cent – within striking distance of what economists consider a healthy level.
The encouraging numbers – contained in the last government report on unemployment before the mid-term elections – pushed the Dow Jones industrial average up 214 points in afternoon trading and could give an important boost at the polls to Democrats and to incumbents in general.
U.S. employers added a robust 248,000 jobs in September, and generated 69,000 more jobs in July and August than previously reported, the government said Friday. That helped bring unemployment down from 6.1 per cent in August.
The jobless rate now stands at the lowest level since July 2008, in the middle of the Great Recession, and is getting close to the roughly 5.5 per cent that the Federal Reserve considers consistent with a healthy economy.
Nevertheless, other gauges of the job market still bear scars from the recession. Wages aren’t rising. And the number of people out of a job for more than six months or stuck in part-time jobs when they want full-time ones remains elevated.
As a result, the Fed may not move up its timetable for raising interest rates to control inflation, economists say. Most expect the Fed won’t act until the middle of next year.
Friday’s data “are generally consistent with the Fed’s economic forecasts and therefore should not change their thinking,” Doug Handler, an economist at IHS Global Insight, said in a note to clients.
The Fed has kept its benchmark interest rate near zero for almost six years in an effort to encourage more borrowing, spending and growth.
The encouraging jobs report came a day after President Barack Obama touted his administration’s economic achievements in a speech. The economy is the top issue in voters’ minds as the November 4 elections near, according to an Associated Press-GfK poll.
While most signs point to an improving economy, the poll found that 62 per cent of likely voters still consider the economy “poor,” little changed from two years earlier.
When the Fed begins raising its benchmark rate, the effects will ripple throughout the economy and could have a profound impact on businesses and consumers. Rates for mortgages, auto loans and credit cards will probably rise. Businesses may cut back on borrowing. And stock markets frequently drop when rates rise.
Lower unemployment usually forces up wages as employers bid for a dwindling supply of job-hunters. Higher paycheques can also push up prices. Some Fed policymakers have already warned that unemployment is low enough to spur higher inflation.
But Fed Chair Janet Yellen has said the unemployment rate may exaggerate the strength of the job market.
For example, there were 7.1 million people working part-time jobs last month even though they want full-time work. That figure is up from just 4.6 million before the recession.
And among the 9.3 million unemployed, three million have been out of work for more than six months. That figure has declined in the past three years.
Another example: The share of adults working or looking for work fell to just under 63 per cent last month, the lowest level in 36 years. That’s down from 66 per cent before the recession.
About half that decline has occurred because of increasing retirements by baby boomers and other demographic changes, economists say. But much of the rest has occurred because many of the unemployed have gotten discouraged and have given up looking for work.
Average hourly pay fell a penny last month to US$24.53. In the past year, it has increased just two per cent. That’s scarcely higher than inflation, which was 1.7 per cent in the past year. In a healthy economy, wages usually rise 3.5 to four per cent a year.
The job gains for September were broad-based and included many higher-paying industries. Professional and business services, a category that includes engineers, accountants and architects, added 81,000 jobs, the most in seven months. Construction companies added 16,000 jobs, while manufacturing just 4,000.
Government jobs, which usually pay solid wages, rose 12,000, the most in five months. Retailers added 35,000 jobs, and hotels and restaurants 23,000.
Many economists boosted their economic forecasts after the report and now expect growth will reach an annual rate of 3.5 per cent in the July-September quarter. That would follow the healthy 4.6 per cent pace in the second quarter.
AP economics writer Paul Wiseman contributed to this report.