WASHINGTON -- U.S. employers stepped up hiring in September and the jobless rate fell to a six-year low, bolstering bets on a Federal Reserve rate hike in mid-2015.
Friday's report on employment is the most significant gauge of the economy's health ahead of Nov. 4 congressional elections.
While President Barack Obama's message of an improving economy has been hampered by persistent drops in family incomes, the hiring data underscored the strides the labor market has made this year.
U.S. non-farm payrolls rose by 248,000 last month and the jobless rate fell two-tenths of a point to 5.9 percent, the lowest since July 2008, the Labor Department said. The results showed a stronger labor market than analysts had anticipated.
"As demand is continuing to accelerate just a bit, businesses are being compelled to hire at faster pace," said Russell Price, an economist at Ameriprise Financial (AMP) in Troy, Michigan.
Most investors continued to bet the Fed will wait until July to raise benchmark interest rates, which the central bank has held near zero since 2008, although bets on a June hike rose.
Yields on U.S. government debt also moved up and stocks opened higher, while the dollar continued a rally that has been in place for weeks.
The pace of hiring has stepped up this year, with the gain in payrolls during the last six months the strongest for any six- month period since before the 2007-09 recession.
In a further sign of strength, 69,000 more jobs were created in July and August than previously estimated.
The employment gains last month were broad-based.
Factories payrolls, which had fallen in August, expanded by 4,000 workers. The retail sector added 35,300 jobs, a big bounce back that the government said reflected an end to employment disruptions at a grocery chain in New England.
There were some downsides. Notably, part of the decline in the unemployment rate was because workers left the labor force. The share of the population with jobs or hunting for one fell to 62.7 percent, its lowest level since 1978.
Fewer Discouraged Job Seekers
That rate has declined in recent years as more workers have retired and as people have given up job hunts due to a weak economy.
Still, a measure of unemployment that partially takes into account worker discouragement fell to 11.8 percent, its lowest level since October 2008.
The number of people who held part-time jobs but wanted full-time work declined slightly to 7.1 million, a sign of slow progress that will be eyed closely by Fed officials as they seek to gauge how much slack remains in the labor market.
Most economists see the economy expanding at around a 3 percent annual rate in the third quarter, well above the average over the last two years of 2.2 percent.
But solid economic growth and hiring may be insufficient for the Fed to initiate an early rate increase.
Several officials at the central bank have expressed concern that inflation remains too low, a sign economic conditions remain too loose. Fed officials next meet to review monetary policy on Oct. 28-29.
Average hourly earnings slipped a penny last month. Over the past 12 months, hourly earnings were up only 2 percent, in line with what has been seen over the past few years and a slight deceleration from August.
That helped cap bets on an early rate hike.
"It was a good report but I don't think it changes the Fed dynamics," said Kim Rupert, a managing director at Action Economics in San Francisco. "I still think the first rate hike is maybe mid-year."
In a separate report, the Commerce Department said the U.S. trade gap unexpectedly narrowed in August to its smallest level in seven months on an increase in exports, which could lead economists to raise their growth forecasts.
-With additional reporting by Herb Lash in New York.
9 Numbers That'll Tell You How the Economy's Really Doing
U.S. Jobless Rate Falls to 5.9%, Lowest Since 2008
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.