WASHINGTON DC – U.S. employment rebounded last month on robust public education and other service-sector hiring, and August payrolls were revised sharply higher, providing further evidence that while the U.S. economy may slow somewhat because of the housing crunch, a recession is not in sight.
The figures, which included an acceleration in wage growth, will likely force investors to rein in hopes for further aggressive easing by the Federal Reserve, The Wall Street Journal reported.
Nonfarm payrolls rose 110,000 in September, the Labor Department said Friday. Just as important, August was revised to an 89,000 rise from a previous estimate of a 4,000 decline. That drop had been seen by Fed watchers as a catalyst in the Fed’s surprisingly aggressive half-point federal funds reduction last month, its first in over four years.
Still, many economists thought that report had overstated employment weakness since it included a big drop in state and local government education payrolls, which was widely expected to be reversed.
The September report included benchmark revisions for the year ended March 2007. Those revisions showed that employment was 297,000 less than previously thought.
The unemployment rate rose 0.1 percentage point in September to 4.7 percent.
Average hourly earnings increased $0.07, or 0.4 percent, to $17.57. That was up 4.1 percent from a year earlier, suggesting tight labor markets are starting to put some upward pressure on wage growth.
September payrolls topped Wall Street expectations of a 100,000 rise. A report Wednesday from Automatic Data Processing and Macroeconomic Advisers that attempts to track the government figure, as well as recent jobless claims data, had pointed to modest gains in employment.
Forecasters in the Dow Jones Newswires survey had expected a 4.7 percent unemployment rate and 0.3% rise in hourly wages last month.
Despite signs that the economy expanded more than 3 percent last quarter, financial markets nonetheless have until Friday expected the Fed to lower the fed funds rate one-quarter point, to 4.5 percent, when it meets Oct. 30-31, and are pricing in another quarter-point reduction by yearend.
The Fed’s rate moves so far have been spurred by the threat posed to the economy by housing and credit-market difficulties and not current data, which have held relatively firm.
The Fed may have cut interest rates in September even if August payrolls had been strong, St. Louis Fed President William Poole said last week, though he conceded that it “would have increased the communication challenge.” In the Sept. 18 policy statement, officials omitted their longstanding reference to high resource utilization — a nod to the tight jobs market — as an inflation risk.
One bright spot for the Fed in Friday’s report was the downward revision to March 2006-March 2007 job growth. That implies productivity was stronger in 2006 and early 2007 than once thought, suggesting the economy can grow faster without inflation.
The Labor Department said hiring last month in goods producing industries fell by 33,000. Within this group, manufacturing firms cut 18,000 jobs. Construction employment was down by 14,000, the fifth decline in six months.
Service-sector employment jumped 143,000. Retail fell by 5,200. Business and professional services companies’ payrolls rose 21,000. Education and health-services employment advanced by 44,000. Leisure and hospitality rose 35,000, while the government added 37,000 jobs, on top of August’s revised 57,000 gain.
The average work week was unchanged at 33.8 hours.
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