Unemployment Drops to its Lowest Level Since the 1960s and is Expected to Decrease Even More

Comment on U.S. Bureau of Labor Statistics Employment Situation Report By Gad Levanon, Chief Economist, North America, The Conference Board

Unemployment Dropping

(New York, NY) The unemployment rate declined to 3.7 percent in September, and total non-farm payroll employment increased by 134,000, the U.S. Bureau of Labor Statistics reported on Friday. Job gains occurred in professional and business services, in health care, and in transportation and warehousing.

The unemployment rate has dropped to the lowest rate since December 1969. For close to two-thirds of the US population, this is the lowest unemployment rate in their lifetime.

The unemployment rate declined by 0.2 percentage point to 3.7 percent in September, and the number of unemployed persons decreased by 270,000 to 6.0 million. Over the year, the unemployment rate and the number of unemployed persons declined by 0.5 percentage point and 795,000, respectively.

Among the major worker groups,

  • The unemployment rates for adult women (3.3 percent) and Whites (3.3 percent) declined in September.
  • The jobless rates for adult men (3.4 percent), teenagers (12.8 percent), Blacks (6.0 percent), Asians (3.5 percent), and Hispanics (4.5 percent) showed little or no change over the month.
  • The number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.4 million over the month; these individuals accounted for 22.9 percent of the unemployed.

In September, the labor force participation rate remained at 62.7 percent, and the employment-population ratio, at 60.4 percent, was little changed.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part- time workers) increased by 263,000 to 4.6 million in September. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

 

Analysis

The tightening of the labor market is leading to an increase in wages. In the past four quarters, average hourly wages have increased by 2.8 percent and accelerated to 3.1 percent in the past two quarters. The acceleration in wages is especially visible among blue collar occupations, where it is essentially back to pre-recession rates.

The US economy is growing rapidly now, and it is expected this trend will continue in the coming quarters, meaning that the demand for workers should not slow down.

In the past 12 months, the US economy added over 2.5 million jobs. Economists are questioning whether an economy at a 3.7 unemployment rate will be able to add that many jobs in the next 12 months. Often when wages increase, employers may begin to use more automation or equipment to reduce human labor requirements.

It is expected that the labor market will continue to get tighter with the unemployment rate reaching 3.5 percent or even lower in 2019, accompanied by rising inflation pressures.

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