Employment growth in the United States slowed sharply in September; unemployment rate drops to 4.8%

WASHINGTON, Oct. 8 (Reuters) – Employment in the United States grew much less than expected in September amid declining government payrolls, but hiring could pick up in the coming months as infections COVID-19 are easing and people are resuming the search for work.

The Labor Department said in its closely watched employment report on Friday that non-farm payrolls increased by 194,000 jobs last month. Data for August has been revised to show 366,000 jobs created instead of the 235,000 previously reported.

Economists polled by Reuters predicted a payroll increase of 500,000 jobs. Estimates ranged from 700,000 jobs to 250,000.

The unemployment rate fell to 4.8% from 5.2% in August.

The modest job gain could dampen expectations of a rapid acceleration in economic growth after an apparent sharp slowdown in the third quarter. The labor market and the economy remain constrained by the shortages of workers and raw materials caused by the pandemic.

COVID-19 infections are declining in the United States, with 100,815 new infections reported on average every day, according to a Reuters analysis of data from state and local governments, as well as health authorities.

The September jobs report is the only one available ahead of the Federal Reserve’s policy meeting on November 2-3. The US central bank signaled last month that it could start cutting its monthly bond purchases as early as November.

Fed Chairman Jerome Powell told reporters that “it would take a reasonably good employment report” to meet the threshold set by the central bank to scale back its massive bond purchase program.

The economy slowed in the third quarter in part because of the summer spike in coronavirus cases, a ebb in the flow of government pandemic relief money and scarce commodities, which hammered home sales of motor vehicles.

The Atlanta Fed estimates that gross domestic product growth slowed to an annualized rate of 1.3% during the July-September quarter. The economy grew at a pace of 6.7% in the second quarter.

Schools have fully reopened for in-person learning, which should allow more people, especially women, to re-enter the workforce.

Over the coming months, there is cautious optimism that the pressure on the workforce may ease after federally-funded benefits expire in early September. The expanded benefits, which offered unemployment checks to people who were not entitled to regular state unemployment benefits, were blamed by businesses and Republicans for the shortage of workers.

There was a record 10.9 million vacancies at the end of July. But many unemployed people seemed to have hidden some government money and are therefore in no rush to start looking for a job.

The labor force participation rate, or the proportion of working-age Americans who have or are looking for a job, has barely budged even as around 25 states led by Republican governors ended expanded benefits in summer.

Some economists say a significant portion of those who dropped out of the workforce have retired, thanks to a strong stock market and record hikes in house prices, which have boosted household wealth. Self-employment has also increased.

Reporting by Lucia Mutikani Editing by Chizu Nomiyama

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