The unemployment rate in the US has declined from 3.7% to 3.5% in September, the lowest in 50 years, easing worries of a recession.
The US Labor Department reported the decline in unemployment rate as 136,000 new jobs were created in September. The department also corrected data for August, raising the number of jobs created from the previously reported 130,000 to the revised number of 168,000.
However, despite the unemployment rate decrease, wage growth remained the same while jobs in the manufacturing industry fell during the same month. The report follows recent weak economic data from the country, including the dramatic decline in manufacturing activity and a slowdown in the growth of the services industry.
Fears over US President Donald Trump’s 15-month trade war with China have been attributed with the economic slowdown. Business confidence has been affected by the trade war, particularly investment and manufacturing.
Neil Shearing, group chief economist at Capital Economics. said: “You’ve had this dichotomy, manufacturing extremely weak, service sector holding up and looking fairly resilient. The key question has been, OK, manufacturing’s weak but so long as the service sector holds up and continues to be resilient, the US economy can avoid recession.”
Shearing added: “The essence of the issue is that since May this year, the manufacturing data both in the US and globally has been pretty horrific. We tend to think of the economy being about making things, but actually in the modern era it’s more about services – health, retail, leisure.”
Jim Reid, a strategist at Deutsche Bank in London, argued that the US has been the “bright spot in a pretty moribund” western economies, growing at about 2% to 2.5% a year, while Europe is falling towards a growth of 0.5% or even 0% growth.
In response to the recent economic numbers, Trump has been pressuring Federal Reserve chairman Jay Powell to cut rates.