Companies Add Workers Quickly

The U.S. job market is showing signs of slowing, but employers are still adding jobs at a fairly healthy pace, a good omen for the economy as a whole.

“Slowdown in place — but no collapse or recession,” Wachovia chief economist John Silvia said in a note to clients a week ago.

Silvia’s note came after the government said employers added workers at the fastest rate in four months in September, but the unemployment rate rose to the highest level in more than a year as firms did not add enough jobs to absorb a steady stream of people coming into the U.S. labor force.

Companies and the government added a seasonally adjusted 110,000 workers in September, the biggest increase since May, the Labor Department said. In a big reversal, the department revised its estimate of job creation in August to a positive 89,000 after last month saying employers cut workers for the first time in four years.

The unemployment rate rose to 4.7 percent in September from 4.6 percent in August, the highest rate since August 2006. The increase came as the number of people entering the labor force jumped in September after dropping in August. While most of those people were hired, not everyone was able to find work.

“The unemployment rate is still relatively low, suggesting that labor markets have stayed on the tight side,” Insight Economics chief economist Steven Wood says. “However, the rising trend on the unemployment rate reflects slowing growth in job creation over the past year.”

The health care industry added workers at a swift pace in September, adding 45,000 jobs. Hotels, restaurants and bars also expanded their payrolls at a healthy rate, while state and local governments added workers at schools.

But on a sour note, manufacturers shed workers for the 15th-consecutive month in September. And the report showed continued fallout from the housing market downturn. Employers cut jobs at building material and garden supply stores, in the finance and insurance industries and at real estate offices last month.

The number of jobs in the residential construction industry fell for the sixth-consecutive month. But employers in commercial building added jobs in September, providing some offset for construction workers.

Economywide, average earnings for production and non-supervisory workers were up 7 cents to $17.57 an hour in September, a 4.1 percent increase from a year ago, the Labor Department said. That was the biggest year-over-year gain since February.

The jobs report is a key gauge of the health of the U.S. economy and will be closely considered by Federal Reserve policymakers as they meet to discuss interest rates Oct. 30-31. The Fed cut rates last month. Fed Vice Chairman Donald Kohn was optimistic.

“Once we get through the near-term weakness … I am looking for moderate growth with high levels of employment,” Kohn told a chamber of commerce group.