WASHINGTON (AP) — The United States (US) unemployment rate fell to 3.5 per cent in September, the lowest level in nearly five decades, even though employers appeared to turn more cautious and slowed their hiring.
The economy added a modest 136,000 jobs, enough to likely ease worries that an economy weakened by the US-China trade war and tepid global growth might be edging toward a potential recession. The government last Friday also revised up its estimate of job growth in July and August by a combined 45,000.
Still, a drop-off in the pace of hiring compared with last year points to rising uncertainty among employers about the job market and the economy in the face of US President Donald Trump’s numerous trade conflicts. Pay growth has also weakened, reflecting the hesitance of employers to step up wages.
“The September jobs report sent some conflicting signals, but the big picture remains one of a labour market — and an economy — whose growth is downshifting but not collapsing,” said economist at JPMorgan Chase Michael Feroli.
The comparatively sluggish hiring data makes it likely that the Federal Reserve later this month will cut rates for the third time this year to try to help sustain the expansion. At the same time, the drop in the unemployment rate from 3.7 per cent may embolden some Fed officials who have resisted rate cuts.
The US economy is “in a good place,” Fed Chairman Jerome Powell said last Friday in remarks in Washington. “Our job is to keep it there as long as possible.”
Investors appeared pleased that the jobs report at least suggested that the economy remains resilient for now. The Dow Jones Industrial Average was up nearly 300 points in afternoon trading.
Excluding government hiring, private-sector job gains over the past three months have slowed to an average of 119,000 a month, the weakest showing in seven years.
And despite ultra-low unemployment, average wages slipped in September, the Labor Department said. Hourly pay rose just 2.9 per cent from a year earlier, below the 3.4 per cent year-over-year gain earlier this year.
Labour economist at jobs marketplace ZipRecruiter Julia Pollak said the pay that employers are advertising has declined this year after rising sharply in 2018. And she noted that the number of part-time workers who would prefer full-time work has risen over the past two months.
Those trends “show that employers are increasingly risk-averse as global uncertainty and recession fears rise,” Pollak said.
Trump has imposed tariffs on a majority of Chinese imports and is threatening to impose taxes on the rest of them on December 15, which would likely escalate prices for consumers and slow spending.
Adding to global economic pressures, the United Kingdom (UK) is nearing an October 31 deadline for a potentially chaotic exit from the European Union. Meanwhile Germany appears on the brink of recession.
CEO and founder of a beverage manufacturer Tom Lix said the trade war has shut down markets that his company was developing in Europe and China. This has forced him to postpone hiring and a planned expansion.
“We were going to build a new building, and add a restaurant and bar, which would have expanded our employment significantly,” Lix said.
He had also expected to add three distillers to his staff of 15. But that was before Europe and China imposed retaliatory tariffs on US bourbon — after Trump had raised import taxes on their goods. Europe had accounted for about 15 per cent of Lix’s sales before the tariffs took effect.
“All of our European connections and all of our Chinese connections — we’re not doing business with them right now,” he said.
The weakest sector of the US economy — manufacturing, which is likely already in recession — cut 2,000 jobs in September. At the same time, retailers shed 11,400 jobs, and employment in mining and logging was unchanged.
The big gains last month were in health care, which added 41,400 jobs, and professional and business services, which include such higher-paying areas as engineering and accounting but also lower-paying temp work. That sector added 34,000 positions.
Friday’s jobs data underscored the benefits of a hot job market for lower-paid Americans and traditionally disadvantaged workers. The unemployment rate for workers without high school diplomas fell to 4.8 per cent, the lowest level on records dating to 1992. The rate for Latinos fell to 3.9 per cent, also a record low.
Amy Glaser, senior vice president at Adecco USA, a staffing firm, says companies are still willing to raise pay for blue collar workers. Some are also paying retention and signing bonuses and in some cases double pay for overtime.
“We’re still seeing strong demand, we’re still seeing more job opportunities out there than candidates,” Glaser said.
The employment figures carry more weight than usual because worries about the health of the economy are mounting. A measure of factory activity fell in September to its lowest level in more than a decade.