US Unemployment Drops to 3.7 Percent, Lowest Since 1969

By Petr Svab
Petr Svab
Petr Svab
Petr Svab is a reporter covering New York. Previously, he covered national topics including politics, economy, education, and law enforcement.
October 5, 2018 Updated: October 7, 2018

The U.S. unemployment rate has dropped to 3.7 percent, reaching the lowest level since December 1969, as the economy continues full steam ahead.

Government data for September also shows Hispanic unemployment dropped to 4.5 percent, matching the record low of July. Black unemployment dropped to 6 percent, nearly matching the historic low of 5.9 percent recorded in May.

Asian unemployment increased to 3.5 percent while unemployment among whites dropped to 3.3 percent, the lowest since December 1969.

Federal Reserve Chairman Jerome Powell said Oct. 2 that the economy’s outlook is “remarkably positive” and he believes it’s on the cusp of a “historically rare” era of ultra-low unemployment and tame inflation. The central bank raised rates last week for the third time this year.

Jobs Growth

The economy added 134,000 jobs in September, while previous estimates were revised up to 165,000 from 147,000 for July and to 270,000 from 201,000 for August, the Bureau of Labor Statistics (BLS) reported on Oct. 5.

Economists polled by Reuters had forecast payrolls increasing by 185,000 jobs in September and the unemployment rate falling a tenth of a percentage point to 3.8 percent.

The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population.

“The weaker gain in payrolls in September may partly reflect some hit from Hurricane Florence,” said Michael Pearce, senior U.S. economist at Capital Economics in New York. “There is little in this report to stop the Fed from continuing to raise interest rates gradually.”

The Labor Department said it’s possible that Hurricane Florence, which lashed the Carolinas in mid-September, could have affected employment in some industries. The department said it’s impossible to quantify the net effect on employment.

The smaller survey of households from which the jobless rate is derived showed 299,000 people reported staying at home last month because of bad weather, compared to an average of 85,000 for a normal September.

The weakness in payrolls last month isn’t corroborated by other labor-market data. An Institute for Supply Management survey published this week showed robust employment gains in the services sector in September.

Economists also noted that the initial September payroll-growth estimate tends to be revised higher.

Wage Growth

The annual rise in wages fell to 2.8 percent from 2.9 percent in August, which was the biggest advance in more than nine years. Wage growth remains sufficient to keep inflation around the Fed’s 2 percent target.

Some economists say wage growth might be understated amid anecdotal evidence that worker shortages as a result of the tightening labor market were forcing companies to raise compensation. Online retail giant Amazon announced this week that it would raise its minimum wage to $15 an hour for U.S. employees starting in November.

“Businesses of all sizes are indicating they are doing whatever they can to keep their workers,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania. “The standard measures just don’t reflect those increases well, if at all.”

The unemployment rate leaves out workers who haven’t sought a job in the past four weeks. The rate was actually 7.5 percent in September, when counting people who sought a job in the past year and also those with part-time jobs in want of a full-time one. This rate, called U-6 by the BLS, has decreased from 8.3 percent a year ago and 9.7 percent two years ago.

Economic Growth

Another month of historically low unemployment means another feather in the cap of President Donald Trump, who made a robust economy one of his core campaign promises.

In addition, the GDP grew an estimated 4.2 percent in the second quarter, claims of unemployment insurance are the lowest since the 1960s, middle-class income is highest on record (adjusted for inflation), and small business optimism has hit one record after another since Trump’s election.

“Financial and jobs numbers are fantastic. There are plenty of new, high paying jobs available in our great and very vibrant economy,” Trump said in a Sept. 20 tweet. “If you are not happy where you are, start looking—but also remember, our economy is only getting better. Vote in Midterms!”

Reuters contributed to this article.

Petr Svab
Petr Svab is a reporter covering New York. Previously, he covered national topics including politics, economy, education, and law enforcement.