Tags: Labor Participation Rate | Jobs | Employment | Economy

Labor Participation Rate Slips to 36-year Low

Friday, 03 October 2014 10:58 AM

A surprisingly powerful surge in hiring pushed unemployment to a six-year low of 5.9 percent in September as the U.S. labor market showed renewed vigor.

However, the report showed average hourly earnings were stagnant in September from a month earlier. Versus a year earlier, wages rose 2 percent.

The so-called participation rate, which measures the number of Americans employed or looking for a job as a share of the working-age population, decreased to 62.7 percent, the lowest since February 1978, from 62.8 percent a month before.

Meanwhile, the 248,000 gain in payrolls last month followed a 180,000 increase in August that was bigger than previously estimated, the Labor Department reported in Washington. The median forecast of economists in a Bloomberg survey called for a 215,000 advance. The jobless rate fell to the lowest level since July 2008, from 6.1 percent.

“This report was strong across the board,” said Dean Maki, chief U.S. economist at Barclays PLC in New York and the top payrolls forecaster according to data compiled by Bloomberg. “The labor market continues to grow fast enough to keep pushing the unemployment rate down.”

Sustained, elevated gains in hiring are needed to bring about faster wage growth and put the expansion in a self-reinforcing cycle of more consumer spending and employment opportunities. Federal Reserve policy makers are trying to determine the extent of labor-market slack as the central bank approaches the end of asset purchases aimed at boosting growth.

‘Big Weight’

Among those recently hired workers is Naveed Siddiqui, who interned at Textron Inc., a manufacturing conglomerate whose brands include Bell Helicopter and Cessna aircraft. When the internship ended last summer, Textron offered Siddiqui, 21, a full-time job after graduation from the University of Maryland. He started in late July.

“It was a big weight lifted off my shoulders,” Siddiqui said. “I could focus on getting set for graduation. There was no really big job hunt.”

One sign of weakness in the report was average hourly earnings, which were unchanged in September and up 2 percent over the past 12 months.

“On balance it’s continuing to trend higher,” Maki said. “As the unemployment rate keeps falling, wage growth will pick up month to month.”

The stronger-than-expected increase in net hiring last month reflected a pickup at grocery stores, factories and restaurants.

Forecast Range

Estimates in the Bloomberg survey of 100 economists ranged from gains of 155,000 to 265,000 after a previously reported 142,000 advance. Revisions to prior reports added 69,000 jobs to payrolls in the previous two months.

The unemployment rate, which is derived from a Labor Department survey of households, was projected to hold at 6.1 percent, according to the survey median.

The participation rate, which measures the number of Americans employed or looking for a job as a share of the working-age population, decreased to 62.7 percent, the lowest since February 1978, from 62.8 percent a month before.

Employment at private service providers increased 207,000, while payrolls rose by 4,000 at factories. Construction companies added 16,000 workers for a second month and retail employment grew by 35,300 last month.

Automakers boosted hiring by 3,300 in September after a 4,500 drop in August that may have reflected the timing of plant shutdowns to retool for the new model year.

Grocery Hiring

Employment at food and beverage stores rebounded 19,500 after a decline in August, when workers walked off the job at a New England grocer.

The underemployment rate, a gauge that counts the unemployed, workers settling for part-time jobs and people who have given up the search, fell to 11.8 percent in September from 12 percent a month earlier. The gauge has averaged 15.1 percent since the recession ended in June 2009.

Drew Brown, 62, is among the underemployed after being laid off from her job as a science editor in November 2009. Despite decades of experience and a master’s degree in biological oceanography, jobs in her field were hard to come by. Last summer, she took part-time work as a driver at a car rental lot near Baltimore.

While the work is “pleasant,” she said, “the commute is long and the pay is low.” Brown is still searching for work in environmental biology or microbiology, something that pays a “livable wage.” Until then, she’d like more hours.

Fed’s Focus

While unemployment is falling and more people are finding work, Fed policy makers are monitoring other indicators, such as the underemployment rate and worker pay, to gauge labor market strength.

Policy makers in September stuck to their pledge to keep interest rates near zero for a “considerable time” after the Fed stops buying assets. The Fed tapered monthly bond buying to $15 billion in their seventh consecutive $10 billion cut, staying on course to end the purchase program this month.

“There are still too many people who want jobs but cannot find them, too many who are working part time but would prefer full-time work,” Fed Chair Janet Yellen said during a Sept. 17 press conference in Washington after the central bank’s last policy meeting. That “significant underutilization of labor resources” is keeping a lid on wages, she said.

Economists surveyed by Bloomberg from Sept. 5 to Sept. 10 forecast the U.S. economy will add 216,000 jobs a month on average this year. That compares with 2013’s average of 194,250 and 186,330 the previous year.

Railroad Work

Norfolk Southern Corp. is among employers putting up help- wanted signs. Shipments have surged after a weather-related slowdown earlier this year, the Norfolk, Virginia-based railroad said.

“We’ve stepped up hiring and we have accelerated our training cycle,” Jim Squires, the company’s president, said at a Sept. 23 investor conference. “We expect to grow by about 900 additional train and engine employees who will come into service largely in the fourth quarter.”

Cars and trucks are another source of strength. Autos have sold at a 16 million annualized rate or faster in each of the last seven months, according to data from Ward’s Automotive Group.

Those stronger sales helped boost household purchases by 0.5 percent in August after little change a month earlier, the Commerce Department reported this week.

Consumer Spending

Household spending and a pickup in capital investment are keeping American assembly lines busy. Factories had their strongest quarter in more than three years, according to data this week from the Institute for Supply Management. While the group’s index dropped to 56.6 last month from 59 in August, its average over the past three months was the highest since early 2011.

“We’re seeing continued momentum from the incoming U.S. economic data,” Emily Kolinski Morris, chief economist at Ford Motor Co., said on an Oct. 1 sales call. “Favorable indicators include continued robust manufacturing activity, growth in investment spending, gradually improving employment conditions with modest income growth, and stabilizing and potential modest gains in housing.”

“While there are still shortcomings in the labor market, conditions have continued to improve gradually,” she said.

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A surprisingly powerful surge in hiring pushed unemployment to a six-year low of 5.9 percent in September as the U.S. labor market showed renewed vigor.The 248,000 gain in payrolls last month followed a 180,000 increase in August that was bigger than previously estimated,...
Labor Participation Rate, Jobs, Employment, Economy
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2014-58-03
Friday, 03 October 2014 10:58 AM
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