US Employment Growth Slows Sharply In September; Unemployment rate drops to 4.8%

A sign advertises job vacancies in Times Square, New York City. 6th of August. US employment rose far less than expected in September. (Eduardo Munoz, Reuters)

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WASHINGTON – U.S. employment rose far less than expected in September due to a drop in state payrolls, but hiring could pick up in the coming months as COVID-19 infections subside and people return to work.

The Labor Department said in its closely watched employment report on Friday that non-farm payrolls increased by 194,000 jobs in the last month. The August data has been revised to show 366,000 jobs created instead of the 235,000 previously reported.

Economists polled by Reuters had forecast that the number of employees will increase by 500,000 jobs. Estimates range from 700,000 to 250,000 jobs.

The unemployment rate fell from 5.2% in August to 4.8%.

The modest increase in employment could dampen expectations of a rapid acceleration in economic growth after an apparently sharp slowdown in the third quarter. The labor market and the economy remain constrained by the shortage of labor and raw materials caused by the pandemic.

COVID-19 infections are declining in the United States, with an average of 100,815 new infections reported every day, according to a Reuters analysis of data from state and local governments and health authorities.

The September employment report is the only one available prior to the Federal Reserve’s November 2-3 policy meeting. The US Federal Reserve signaled last month that it could curb its monthly bond purchases as early as November.

Fed chairman Jerome Powell told reporters that “it would take a reasonably good employment report” to reach the central bank‘s threshold for scaling back its massive bond-buying program.

The economy hit a speed bump in the third quarter due, among other things, to the flare-up of coronavirus cases in the summer, a slowdown in government pandemic aid, and scarce raw materials that have slowed vehicle sales.

The Atlanta Fed estimates that GDP growth slowed to an annualized rate of 1.3% in the July-September quarter. The economy grew by 6.7% in the second quarter.

Schools have been fully reopened to face-to-face learning, which is expected to allow more people, especially women, to return to work.

For the coming months, there is cautious optimism that labor shortages could ease after the state benefits expire in early September. The extended benefits that unemployed benefits offered to those who were not eligible for regular government unemployment benefits were blamed for the labor shortage by corporations and Republicans.

At the end of July there was a record 10.9 million vacancies. But many unemployed seem to have set aside some of the government money and are in no hurry to start looking for a job.

The labor force participation rate, or the percentage of Americans of working age who have a job or are looking for a job, barely moved, even though some 25 states under the leadership of Republican governors ended benefit expansion in the summer.

Some economists say that a significant proportion of people who have left the labor force have retired thanks to a strong stock market and record gains in house prices that have increased household wealth. Self-employment has also increased.

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