Employers continued to add to payrolls in September as record openings drew more Americans into the workforce and most found jobs, indicating the U.S. labor market is settling into a pace that will support the economy.
The 156,000 increase followed a 167,000 rise in August that was more than previously estimated, a Labor Department report showed Friday in Washington. While the September figure was weaker than the 172,000 median forecast of economists, payrolls included the biggest drop in government employment in a year. The jobless rate rose to 5 percent as the labor participation rate ticked up to a six-month high.
Companies face a limited pool of available and qualified workers at the same time that improving prospects for employment are drawing more people into the labor force. Steady progress will underpin further wage gains and consumer spending, the main driver of U.S. expansion this year, and encourage Federal Reserve policy makers to follow through on their forecast for an interest-rate increase by the end of 2016.
“The job market continues to move forward,” said Ryan Sweet, an economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “The unemployment rate rose for all the right reasons. We got some acceleration in wage growth in September but we’d love to see much stronger gains.”
The data keep the Fed on track to raise interest rates in December, and nothing “raises a red flag” for the central bank, Sweet said.
September payrolls have tended to disappoint when the initial data are released, based on data since the last recession ended. Estimates of 87 economists in the Bloomberg survey ranged from gains of 125,000 to 220,000. August was initially reported as a 151,000 increase.
Revisions to prior reports subtracted a net 7,000 jobs from payrolls, as July’s figure was lowered to 252,000 from 275,000.
The unemployment rate, which is derived from a separate Labor Department survey of households, rose as employment increased by 354,000. The jobless rate was projected to hold at 4.9 percent, according to the survey median, close to the lowest since 2007.
The participation rate, which shows the share of working-age people in the labor force, increased to 62.9 percent, from 62.8 percent. It has been hovering close to the lowest level in more than three decades.
Private employment, which excludes government agencies, rose by 167,000 after a 144,000 increase the prior month. Government payrolls fell by 11,000 due to a slump in education jobs at the local level that may reflect difficulties adjusting for the start of the school year.
The report also showed differences across industries. Service providers, which include restaurants, business services and health-care, are typically less exposed to headwinds — such as the stronger dollar and tepid overseas economies — than manufacturers.
Payrolls at factories fell by 13,000, after a 16,000 drop in the previous month, while construction jobs rose by 23,000.
Retailers increased payrolls by 22,000. Employment in leisure and hospitality rose 15,000, the smallest in four months.
Wages showed less of a pickup than projected, as a sustained acceleration has been elusive in the current expansion that began in mid-2009. Average hourly earnings rose by 0.2 percent from the prior month, compared with the 0.3 percent median estimate of economists. Worker pay increased 2.6 percent over the 12 months ended in September, following a 2.4 percent gain the prior month.
The average work week for all workers rose to 34.4 hours from 34.3 hours.
With the unemployment rate low, Fed officials have been focusing on other measures that suggest there’s still slack in the labor market. Americans who are working part-time though would rather have a full-time position, or the measure known as part-time for economic reasons, fell by 159,000 to 5.89 million.
The underemployment rate — which includes part-time workers who’d prefer a full-time position and people who want to work but have given up looking — held at 9.7 percent.