Employers added just 142,000 jobs in September
News that employment growth slowed for the second straight month in September renewed concerns about the economy and weakened the case for the Federal Reserve to raise interest rates later this year.
Employers added 142,000 jobs last month, the Labor Department said Friday, far below the gains of 203,000 that economists surveyed by Bloomberg had expected.
The unemployment rate, which is calculated from a different survey, was unchanged at 5.1% as a sharp drop in the number of Americans employed was offset by an even steeper decline in the number working or looking for jobs, the Labor Department said Friday.
Also discouraging: Employment gains for July and August were revised down by a total 59,000. Additions were revised from 245,000 to 223,200 in July and from 173,000 to 136,000 in August.
Last month, businesses added 118,000 jobs, driven by advances in health care, leisure and hospitality and professional and business services. Federal, state and local governments added 24,000.
In another disappointing sign, average hourly earnings ticked down 1 cent to $25.09 and are up 2.2% over the past year, roughly in line with the sluggish 2% pace that has prevailed through most of the recovery. A pickup in wage growth would give the Fed more evidence to raise its benchmark interest rate for the first time in nearly a decade.
Also, the average work week slipped to 34.5 hours from 34.6 hours, possibly signaling slower hiring in the months ahead.
Concern about what the report meant about the economy initially sent stocks tumbling, with the Dow Jones industrial average initially down 258 points. But the selling quickly faded and turned into a rally as focus shifted to the fact the weak jobs growth increased the odds that the Fed won't raise interest rates until next next year. The Dow rebounded to close up 200 points at 16,472 for a total swing of nearly 460 points from its low.
The Fed last month declined to lift the rate, citing stubbornly low inflation and spillover effects from economic troubles overseas. But Fed policymakers indicated they still expect to hoist the rate later this year, and reports on the labor market are expected to be critical to its decision.
But Friday's disappointing news raises questions about whether the slowdown reflects normal volatility or a more sustained drop in hiring that could lead the Fed to hold off until next year.
"The chances of a rate hike by the Fed this year just went way down," Paul Ashworth, chief U.S. economist of Capital Economics, wrote in a note to clients.
Labor initially tallied payroll gains of 173,000 in August, below this year's 200,000-plus monthly average. But economists said first estimates for August have been unusually low the past five years because of quirky seasonal adjustments related to the start of the school year, with subsequent revisions adding an average 77,000 jobs a year. Instead, the tally for August was revised even lower.
Some of the recent weakness in the job market can be explained by a strong dollar that continues to hammer manufacturers' exports and low oil prices that's hobbling drilling activity and related production. Mining companies cut 12,000 jobs last month, and manufacturers shed 9,000 after losing 18,000 the previous month.
But the domestic economy generally has been solid, underpinned by an acceleration in consumer spending and the housing recovery. Some economists say the hiring slowdown at least partly can be traced to employers' struggles to find enough skilled workers. Job openings hit a record 5.8 million in July, but hiring has lagged.
"I think a lot of it is a supply-side issue," said economist Joel Naroff of Naroff Economic Advisors.
Some sectors notched at least a moderate payroll gains. Healthcare added 36,000 jobs; leisure and hospitality, 35,000; professional and business services, 31,000; and retailers, 24,000
Other recent economic data indicated job growth had returned to form September. Payroll processor ADP estimated businesses added 200,000 jobs.Initial unemployment insurance claims, a reliable barometer of layoffs, continued to trend down. And more consumers saw jobs as "plentiful," according to the Conference Board.
In an apparent bright spot in Friday's report, a broader measure of unemployment -- that includes the unemployed as well as part-time workers who want full-time jobs and discouraged workers who have stopped looking for jobs -- fell to 10% from 10.3%. The ranks of those "involuntary part-time" workers dropped by 447,000.
But Barclays Capital says the sharp decline likely doesn't suggest that most of those workers found full-time jobs, but rather that they left the labor force.