A stronger-than-expected jobs report Friday that featured an unemployment rate below 6 percent for the first time in more than six years eased concerns about a softening economy but highlighted moribund wage growth.
Employers added a robust 248,000 jobs in September, pushing the unemployment rate down two-tenths of a percentage point to 5.9 percent, the Labor Department said. That’s the lowest it’s been since June 2008.
The strong numbers followed a weak August, in which just 142,000 jobs were thought to have been added. The Bureau of Labor Statistics revised that number Friday to 180,000, and July’s preliminary number was revised up by 31,000 jobs to 243,000. The revisions suggest the economy enjoyed more tail winds than had first been thought.
“Job gains in October were robust, and upward revisions to previous months show that the job market is in full swing,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics.
Factoring in the monthly variability, job growth is now closer to about 225,000 per month, he said.
“At this pace of job growth, the unemployed and underemployed are quickly being fully employed,” Zandi said. “Also encouraging is the breadth of the job gains across industries and across all pay scales. The increase in hours worked per week is a positive leading indicator for continued strong gains.”
The report wasn’t without concerns. Wage growth was flat in September, and for August it was revised up just a tenth of a percentage point. It meant that year-over-year wage growth slowed to 2 percent in September from 2.1 percent in August.
“Wage growth has remained stubbornly low despite the drop in the unemployment rate, suggesting that perhaps labor market conditions are indeed weaker than suggested by the headline unemployment rate,” noted Michelle Meyer, a senior economist with Bank of America Merrill Lynch.
One explanation, she offered in an investor note, is that many firms didn’t cut wages during the recession and thus may not feel the need to raise them now amid an improving labor market.
As the last jobs report before the November midterm elections, the report’s timing was opportune for the Obama administration as it tries to talk up the improving economy. Just Thursday, in a speech on the economy, President Barack Obama declared, “By every economic measure, we are better off now than when I took office.”
Obama addressed the jobs report Friday at a visit to a manufacturing plant in Princeton, Ind., saying the U.S. was “on pace for the strongest job growth since the 1990s.” He said the U.S. had now put more people back to work than Europe, Japan and all other advanced economies combined.
“This progress we’ve been making has been hard – it goes in fits and starts and it’s not always perfectly smooth or as fast as we want – but it is real,” he said. “It is steady and it is happening.”
The manufacturing sector played an important role in the economic rebound of recent years. But over the past few months it has lagged as hiring was unchanged in August and up by just 4,000 jobs in September.
“Manufacturers remain mostly optimistic about demand and production, and recent data on hiring plans would seem to indicate stronger job growth that what these figures show,” said Chad Moutray, the chief economist for the National Association of Manufacturers. “Hopefully, we will begin to see healthier employment gains in the coming months. If not, this report . . . might dampen an otherwise positive expectation about the next few months.”
Within the numbers, the professional and business services sector led the way with 81,000 hires in September. After shedding jobs in August, retailers added more than 35,000 positions. The leisure and hospitality sector, a signpost for business and consumer spending, added 33,000 jobs.
“So far this year, private employment has risen by nearly 2 million, on pace for the strongest year of private-sector job growth since 1998,” Jason Furman, the chairman of the White House Council of Economic Advisers, said in his blog.
Interviewed on CNBC, Furman acknowledged that he didn’t expect to see a jobless rate below 6 percent during Obama’s second term and said unemployment was falling at nearly the “fastest pace in 30 years. This is really good news.”
Despite administration efforts to tout the economic rebound, however, polls show that most Americans say they don’t feel it.
“Part of that is that wage growth is still soft,” said Gus Faucher, senior economist for PNC Financial in Pittsburgh, who noted the wages continue growing barely above the rate of inflation. “People feel that they’re not getting ahead.”
There are also large numbers of people who’ve exited the workforce and have yet to come back, he said.
“The labor market is getting better, but we’re not at the point where people feel it’s a really good labor market,” said Faucher, who expects that to happen about a year from now. “Consumers are feeling better – they’re starting to spend more – and that creates further job growth.”
Significantly, the jobless rate didn’t fall in September because of more people leaving the labor force. The rate of participation in the workforce was little changed in September, at 62.7 percent, and the ratio between employment and the broader population stood at 59 percent for the fourth straight month, according to the Labor Department.
That both indicators were unchanged, albeit weaker than historical averages, means hiring brought down the unemployment rate.
“Businesses appear to be fully engaged in expanding their operations. They have ramped up their hiring and investment in recent months. All indications are this will continue,” said Zandi of Moody’s Analytics. “Unless the economy is derailed by events overseas or something out of left field, we should be back to full employment by late 2016.”