The unemployment rate dipped below 6% for the first time in six years, as the U.S. Department of Labor reported today (Friday) that employers added 248,000 new jobs in September. The gains took the unemployment rate down to 5.9% from August's 6.1% and beat consensus estimates of 215,000.
The September jobs report also included sharp upward revisions to the previous two months' figures.
The number of jobs gained in July was revised from 212,000 to 243,000. August figures were revised from 142,000 to 180,000. The strong revisions amounted to an additional 69,000 jobs collectively.
So, where did all these job gains come from?
Here's a breakdown.
"It is hard to be pessimistic when the unemployment rate falls below 6% for the first time in more than six years," Steven Pressman, professor of finance and economics at Monmouth University in West Long Branch, N.J., told Money Morning. "It is also hard to be pessimistic when the BLS reports that nearly a quarter of a million jobs were created in September at the same time that they significantly revise upward the job gains from earlier in the summer."
Still, there are wrinkles in what this jobs report says about the U.S. economy.
"A good part of the drop in the unemployment rate resulted from a decline in labor force participation," Pressman said. "The 0.1% drop in labor force participation [the share of the working-age population employed or looking for a job] was responsible for half the decline in the unemployment rate. More telling, according to the household survey, the increase in those not in the labor force (315,000) exceeded the gain in employment (232,000)."
According to a report released Thursday from the Center for American Progress, a progressive think tank, the labor force participation rate (62.7%) has been steadily declining since the end of the Great Recession. and is now as low as it was in the late 1970s.
Stagnant wage growth also remains a concern.
"A strong labor market should be accompanied by rising wages," Pressman continued. "This is basic economics: higher demand for workers should increase wages. However, wages were stagnant in September. Over the past year, wages have grown at a rate of 2%, the U.S. inflation rate. With no real wage growth, it is hard to think that the job market is really strong. And with stagnant wages, it is hard to figure out where the demand is going to come from that will sustain the economy and generate future job growth."
Indeed, although companies across the United States have created some 10 million new jobs from the labor market bottom in 2009, the 2013 median household income was 8% below its pre-recession level, according to a Sept. 13 Census Bureau report.
The September jobs report is the last before the U.S. Federal Reserve's policy meeting at the end of this month, at which it will end its market-supportive asset-buying program.
Now: We're entering a rising interest rate environment for the first time in 33 years. This is a watershed market event - a shift, really - that will change how you invest. Here are the best investments to make to prepare for rising interest rates.
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