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Jobless rate falls to 3.9%
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October 6, 2000: 9:13 a.m. ET
U.S. job growth stronger than expected; hourly wages increase a bit
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NEW YORK (CNNfn) - The U.S. unemployment rate fell to 3.9 percent in September, matching the 30-year low touched in April, as strong job growth in service industries helped reverse a two-month decline in hiring, the government reported Friday.
The jobless rate fell from 4.1 percent in August, the Labor Department said. Most Wall Street analysts had forecast the unemployment rate would hold steady in September.
The economy created 252,000 jobs outside the farm sector last month, rebounding from a revised drop of 91,000 jobs in August, the department said. But the gains were skewed by the return of 87,000 telecom workers after a strike against Verizon Communications over the summer.
The service industry showed the strongest gains, adding 200,000 jobs last month on a seasonally adjusted basis. The total number of jobs added in September exceeded Wall Street forecasts of 225,000, according to analysts polled by Briefing.com.
But despite the fast pace of job growth, average hourly earnings -- a key inflationary gauge -- rose only a modest 3 cents, or 0.2 percent, to $13.83 an hour, compared with a 0.4 percent increase in August. Analysts had expected a 4-cent increase in September.
Figures may keep Fed watchful
Economists said the data gave a mixed picture of the jobs scenario, a key measure of the nation's economic health that is high on the Federal Reserve's data watch list when considering whether to alter interest rate policies. Earlier this week, the Fed held interest rates steady amid growing signs that the U.S. economy was beginning to slow. But the central bank also warned that scarcity of workers as well as spiking oil prices are possible risks for inflation going forward.
While Friday's report showed September hourly earnings rose only slightly -- suggesting little pressure on employers to raise wages and benefits despite the tight labor pool -- the decline in the unemployment rate suggests the economy is still growing strongly, said Douglas Lee, president of Economics from Washington.
Some Fed watchers have speculated the central bank might cut interest rates early next year, following a series of six rate increases since July 1999 intended to cool off the economy. But the continuing tight labor market likely makes such a rate cut unrealistic, Lee said.
"A lot of people had expected the next Fed move to be a rate cut," he said. "After looking at this report, the probability of that goes down."
But other economists played down the report's potential impact on Fed policy makers.  The Fed's next meeting is Nov. 15.
"Clearly labor markets are very, very tight," Anthony Chan, chief economist with Banc One Investment Advisors, told CNNfn's Before Hours. "But average hourly earnings ... actually didn't go up that much, which is encouraging" to investors and policy makers worried about inflation, he said. (453K WAV) (453K AIFF)
The jobs report is the government's first broad glimpse of the economy's health each month and is closely watched by Wall Street. After an early bounce into positive territory, stocks fell Friday in response to the report and a series of earnings warnings among big corporations.
Analysts said the report was especially complicated, and likely confused many investors, but that the bottom line is fears about future interest rates increases have now been rekindled because of the prospect of a potential labor shortage.
The shortage has been felt acutely among small business owners. A record 35 percent complained in August that they had jobs they could not fill.
The economy has to slow or wages will have to grow, a small-business economist warned Friday after viewing the unemployment statistics. The job squeeze "will be resolved either through higher labor costs or a weakening of the economy," said William C. Dunkelberg, chief economist at the National Federation of Independent Business.
In an interview with CNNfn, Labor Secretary Alexis Herman said there was little fear of a worker shortage, saying there is a pool of roughly 13 million people in the United States who could be added to the labor market. Many of these people could work if they receive appropriate training or can get their child care or transportation needs met, she said.
"We filled nearly 250,000 jobs this month," she said. "That's a very good number and it says that we were able to find workers to fill the jobs that this economy is creating."
Verizon strike, census payrolls skew numbers
The jobs report was affected by a number of factors. The return of 87,000 workers after the Verizon strike added to total employment, which is seasonally adjusted, while the departure of 27,000 temporary census workers subtracted from job growth during the month. Eliminating the one-time anomalies, the total number of jobs created would have totaled about 200,000.
Construction employment fell slightly, although not as much as is typical during September. Manufacturing employment fell 66,000 after a decline of 117,000 jobs in August. The Labor Department said the employment losses were widespread across the industry, affecting makers of durable and nondurable goods.
More data awaited
Other pieces of the economic puzzle will be released in the next few weeks, including key inflationary reports next Friday on retail sales and producer prices.
After a softening in the summer, September retail sales are expected to rebound, with a 0.4 percent gain forecast by analysts polled by Briefing.com, compared with a 0.2 percent increase in August.
Meanwhile, the Producer Price Index is expected to jump about 0.4 percent because of high energy prices, compared with a 0.2 percent drop in the prior period. But the core rate, which excludes the volatile energy sector, is expected to rise only about 0.1 percent. 
-- from staff and wire reports
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