Wonkblog: Hiring rebounds in Sept.; jobless rate falls to 5.9%
Ylan Q. Mui
Friday, October 03, 2014 | 8:49AM
The U.S. job market rebounded in September as the economy added 248,000 jobs, according to government data released Friday morning, a reassuring sign of the nation’s recovery.
Hiring has topped the crucial benchmark of 200,000 jobs a month for much of the year. But lackluster job growth in August cast a pall over the pace of improvement in the labor market. Wall Street seemed to be setting itself up for disappointment again after several big days of losses this week.
Yet America’s businesses and workers are proving resilient. The pickup in hiring last month helped drive down the nation’s unemployment rate to 5.9 percent, the lowest level in six years. Leading the way were gains in the professional and business services sector, which added 81,000 jobs, and the retail and health care industries. The government also increased its estimate of job growth in July and August by 69,000 positions to 180,000.
“This is a very muscular report,” said Eric Lascelles, chief economist at RBC Global Asset Management. “It’s showing powerful job creation, no matter how one cares to slice it.”
Markets opened higher on Friday’s news, with the Dow Jones average and Standard & Poor’s index both up 0.5 percent.
The strength in hiring this year has been one of the clearest indications that the country is finally escaping the long shadow of the Great Recession. But other statistics underscore why the recovery still feels mediocre: Economic growth has been choppy, inflation is unusually low, and wages have barely budged. About 3 million people had been out of work for at least six months in September, and the number of people involuntarily working part-time is unusually high. The size of the nation’s labor force edged down to 62.7 percent.
In a speech at Northwestern University on Thursday, President Obama celebrated the improvements but acknowledged that many have yet to trickle down.
“By every economic measure, we are better off now than we were when I took office,” he said. “At the same time, it’s also indisputable that millions of Americans don’t yet feel enough of the benefits of a growing economy where it matters most — and that’s in their own lives.”
Obama called for raising the minimum wage and investing in infrastructure, among other things, to help bolster growth. But on Friday, Republicans pushed back against those proposals and blamed the president for prolonging the road to recovery.
“Raising the minimum wage and continuing to impose more regulations won’t get this economy into high gear,” Rep. Kevin Brady (R-Tex.), chairman of the House Joint Economic Committee, said in a statement. “The last thing we need right now is to give businesses more reasons not to hire additional workers.”
The stronger job market is also forcing the Federal Reserve to back away from nearly six years of easy money. The nation’s central bank is slated this month to end the bond-buying program that has pumped more than a trillion dollars into the economy. It is also considering when to raise its benchmark interest rate, which has been at zero, for the first time since 2006.
‘Taken by itself, the strength in payrolls and continued decline in the unemployment rate is the best argument for a more aggressive monetary policy stance,” TD Economics senior economist James Marple said in a client note. “However, the Fed has repeatedly noted that they are looking at the labor market from a more holistic perspective.”
Most notably, wage growth has proven elusive despite robust hiring. The government reported Friday that average hourly earnings actually inched down one cent in September to $24.53.
But some officials believe the central bank is already behind the curve. In a speech Thursday evening in Mississippi, St. Louis Fed President James Bullard reiterated calls for the central bank to move sooner rather than later. He has argued for the Fed to hike rates by the end of the first quarter of 2015. Most central bank officials favor moving around the middle of next year or later.
But hiring has been more robust, and the unemployment rate has fallen faster than the Fed expected. Several influential Fed officials have said the central bank can afford to be patient in order to make sure it doesn’t inadvertently undermine the economy’s progress. But Bullard and a handful of other critics, both inside and outside the central bank, believe the Fed should respond more aggressively to those improvements.
“I interpret this as a degree of patience,” Bullard said Thursday of waiting until spring 2015.