US unemployment rate falls below 6%

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WASHINGTON, D.C.: The US jobs machine shifted into higher gear in September, pushing the unemployment rate down to the lowest level in six years.

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In a boost for President Barack Obama a month before midterm congressional elections, the Labor Department reported that the economy pumped out 248,000 net new positions last month, sending the jobless rate to 5.9 percent.

Together with upward revisions from previous months, this eased concerns about a late-summer slump in job creation.

The solid run so far this year—an average of 227,000 jobs each month—brought the number of officially unemployed down to 9.3 million, the fewest since July 2008.

But the data also showed continued weakness in wages, and still-large numbers of long-term unemployed, part-time workers and labor market dropouts.

That could challenge Obama’s bid to prove that his stewardship of the economy has served Americans well, ahead of the November midterm congressional elections.

Obama’s Democrats are battling to prevent Republicans from seizing control of both houses of Congress, and the president hit the campaign trail this week to promote his economic record.

Speaking at an Indiana steelworks, he boasted that since the 2008-2009 recession, “the US has put more folks back to work than Europe, Japan, and all other advanced economies combined.”

“Over the past 55 months our businesses have now created 10.3 million new jobs,” he said.

“It has got a little bit to do with some decisions we made quite early on in my administration.”

Flat wages, low participation
The September jobs market data underscored those gains.

Job creation was strongest in the restaurant industry, health care, food and beverage stores, and administrative services, with also modest additions in construction and government hiring.

But weaknesses persisted. The number of those who have dropped out of the labor market—a volatile figure month-to-month—rose by 315,000, almost as much as the fall in the number of unemployed.

The civilian labor force participation rate fell a tick to a new low of 62.7 percent, far below the 66 percent level prior to the severe recession.

The number of involuntary part-time workers was little-changed in September at 7.1 million, and wages were down slightly for the month.

Indeed, since the recession weekly wages have risen by just over two percent a year, barely staying ahead of inflation, adding to the feeling among many Americans that things have not improved.

“Much of the decline in the unemployment rate is due to people leaving the labor force,” said Dean Baker at the Center for Economic and Policy Research in Washington.

“While the labor market is improving, it still has a long way to go before reaching full employment,” he said.

Chris Williamson of economic consultancy Markit said policy makers will remain bothered by stagnant paychecks for most people.

“Without substantially higher wage growth, the fear is that households will pull back on consumption if interest rates and borrowing costs start rising, snuffling out the wider economic recovery.”

That adds little fresh pressure on the Federal Reserve, which has been focused on cutting joblessness, to move more aggressively to tighten monetary policy from the current easy-money stance.

Fed Chair Janet Yellen has argued for much of the year that significant slack in the labor market gives the central bank more time before it has to raise its benchmark fed funds interest rate up from the zero-level where it has been since late 2008.

So far the Fed has signaled it expects an initial rate hike in the second half of 2015.

Economist Harm Bandholz of UniCredit said he expects wage gains “are about to gain some momentum” and the Fed could also shift gears “faster than currently anticipated by most financial market participants.”

US markets were happy with the news. The S&P 500 gained 1.1 percent, and the dollar surged to $1.2501 to the euro, the strongest level in five years.

AFP

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