Unemployment Rate Drops, Hiring Rebound Strengthens Economy with 248,000 Jobs
- Updated: October 3, 2014
The labor market rebounded sharply due to an additional 248,000 jobs being added. Although wage growth remained weak, even with a strong employee pool, the unemployment rate dropped to 5.9%, making it the first time since 2008 that the rate has dipped below 6%, this according to the Labor Department.
Based on an evaluation by economists who forecasted that just 215,000 jobs would be added last month and that the unemployment rate would not change, today’s numbers were better than predictions.
Initially, job gains in July were forecast at 212,000 but ultimately revised to 243,000 and for August, numbers improved from 142,000 to 180,000, pushing gains for the two months by 69,000. Overall, total payroll gains for 2014 reached more than two million.
Fueled by strong gains in business and professional services, as well as healthcare and retail, businesses added 236,000 jobs last month. An additional 12,000 jobs were added by local, state, and federal government entities.
For the entire year of 2013, monthly employment gains were 194,000 but for the current year so far, gains have averaged 227,000.
As far as hourly earnings, a slight increase was reported although they declined by $0.1 to $24.53, up only 2% throughout the prior year. This falls in line with modest increases over the five-year recovery period.
In a statement from Joel Naroff, economist with Naroff Economic Advisors, there is a clear indication of the market tightening but without wage pressures. Naroff had some concern about businesses increasing wages in an effort to deal with labor shortages. A stronger economic growth is possible but only if consumers have money to spend.
However, Naroff, as well as other economists, anticipate that later this year, wage growth will improve.
There were other encouraging labor market indicators this month such as the average work week increasing to 34.6 hours after staying the same for six consecutive months at 34.5 hours. This could be a sign that strong hiring will continue.
The unemployment rate fell from 11.8% to 12%, which consists of workers who have stopped seeking employment due to being discouraged, as well as part-time workers interested in securing full-time work and people currently unemployed.
Leading job gains with 81,000 were professional and business services, followed by retail at 35,000, hospital and leisure at 33,000, and finally, healthcare at 23,000. At the lower end of the spectrum was construction with 16,000 new jobs and manufacturing that added only 4,000.
Even with higher revised numbers, August’s monthly job growth experienced a slowdown in spite of a six-month average of 200,000. However, the disappointing total is considered by some economists as being an irregularity, citing that indicators for the labor market remain positive.
According to the Labor Department, initial claims pertaining to the jobless continue at a precession level and for private payroll, an estimated 213,000 jobs were added this month. A boost is also anticipated because of the approximate 20,000 workers on strike getting back on the job.
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