Job growth in the U.S. slowed by much more than expected in the month of September, according to a closely watched report released by the Labor Department on Friday.
The Labor Department said non-farm payroll employment rose by 661,000 jobs in September after spiking by an upwardly revised 1.489 million jobs in August.
Economists had expected employment to increase by 850,000 jobs compared to the jump of 1.371 million jobs originally reported for the previous month.
“Job growth is moderating just as fiscal aid is expiring – a toxic cocktail,” said Kathy Bostjancic, Chief U.S. Financial Economist at Oxford Economics. “Despite relatively strong growth since May, employment remains a staggering 10.7 million below the pre-Covid level.”
She added, “The slowing momentum in the labor market bodes poorly for the broader recovery and points to increasing scarring effects from the crisis.”
The weaker than expected growth was partly due to a sharp pullback in government employment, which tumbled by 216,000 jobs in September after soaring by 467,000 jobs in August.
The steep drop in government jobs was mainly in state and local government education, although the number of temporary census workers also declined.
Meanwhile, employment in the leisure and hospitality sector surged up by 318,000 jobs. Notable job growth was also seen in the retail, health care and social assistance, and professional and business services sectors.
Despite the weaker than expected job growth, the report said the unemployment rate slid to 7.9 percent in September from 8.4 percent in August. The unemployment rate was expected to dip to 8.2 percent.
The bigger than expected drop in the unemployment rate came as the labor force shrank by 695,000 persons, while the household survey showed employment rose by 275,000.
The unemployment rate continued to decline from the post-World War II record high of 13.5 percent in April but remains well above the 50-year low of 3.5 percent seen late last year.
The report said average hourly employee earnings edged up $0.02 or 0.1 percent to $29.47. Annual wage growth inched up to 4.7 percent in September from a revised 4.6 percent in August.
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