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October 6, 2000

U.S. Economy: Sept. Jobless Rate Falls to 30-Year Low of 3.9%
By Siobhan Hughes, Bloomberg

Employment Situation Will Only Tighten As Holidays Approach ... Weiss comments

WASHINGTON - U.S. unemployment fell in September to 3.9% -- matching a 30-year low -- and the economy added more workers than any time in the last five months as its record nine-year-old expansion kept generating jobs.

At the same time, wages increased at the slowest pace in four months. "It's growth without inflation," said Mark Vitner, senior economist at First Union Corp. in Charlotte.

Employers hired 252,000 workers, including 87,000 at Verizon Communications who ended their strike, the Labor Department said. Construction employment increased at the fastest pace since March, and the number of temporary workers grew.

Average hourly earnings rose 0.2%, or 3 cents, in September, following 0.4% increases in August and July. "That's a pretty modest wage increase, given that the unemployment rate is back at a low," Vitner said.

September's jobless rate matched April's, which was the lowest since January 1970, when it was also 3.9%. Unemployment had risen to 4.1% in August.

Analysts expected an unemployment rate of 4.1% and an increase of 230,000 jobs in September.

Even though government reports indicated a slight easing of the labor market in July and August, this month's report shows that the labor pool has been shrinking steadily. Now that the temporary strike at Verizon is over and its employees (who were never really in the market for another job) have returned to work, the unemployment rate truly reflects how tight the labor market really is. Furthermore, as employers struggle to fill positions for the upcoming holidays, wages are likely to jump sky-high.

Just this morning, shipper UPS announced that it plans to hire 95,000 employees for the holiday season. If 87,000 Verizon employees can skew the unemployment rate by 0.2%, UPS' hiring spree will certainly bring the unemployment rate well below the 30-year low reached this month. In addition to UPS, several other retailers such as catalog merchant Land's End and department store Macy's West are actively recruiting seasonal workers -- and they're all paying higher wages than last year.

Most of the news reports today, like the one above, comment on "growth without inflation" and "modest wage increases," but the shrinking labor pool is bound to drive up wages and inflation in the next few months. No wonder the market is reacting negatively to the news.

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