Unemployment fell to a nearly 50-year low in September even as employers added a disappointing 134,000 jobs amid increasing worker shortages and possible effects from Hurricane Florence.

The unemployment rate fell from 3.9 to 3.7 percent, lowest since December 1969, the Labor Department said Friday.

Economists had estimated 185,000 new jobs were created last month, according to a Bloomberg survey.

Goldman Sachs expected the hurricane to reduce employment by 33,000 in the Carolinas. But Morgan Stanley said the storm likely affected too limited of an area and struck too late during the week of Labor’s survey to have a meaningful impact. Workers are counted as employed as long as they show up for any part of their pay period.

Yet employment in leisure and hospitality, which includes hotels and restaurants, fell 17,000 last month, suggesting the storm was a factor.

"The headline payroll number is a weather story," Ian Shepherdson, chief economist of Pantheon Macroeconomics, wrote in a note to clients.

The number of workers across the country who stayed home because of weather increased by 276,000 last month on a nonseasonally adjusted basis, compared with a median 7,000 rise over the past 10 September jobs report, says Jim O'Sullivan, chief U.S. economist of High Frequency Economics.

Still another wrinkle is that Labor tends to undercount September employment in its initial estimate and revise it up later, O'Sullivan says.

On the positive side, payroll increases for July and August were revised by a total 87,000. July’s gain was raised from 147,000 to 165,000 and August’s from 201,000 to 270,000. That largely offsets the weak September showing.

Meanwhile, the labor market faces other challenges. Businesses are having a harder time finding qualified job candidates. Many analysts expect the crunch to slow hiring in the months ahead despite strong economic growth.

And a new Trump administration tariff on $200 billion in Chinese imports – along with China’s retaliation against U.S. imports – took effect last month, hitting many consumer goods. That has dinged business confidence and could curtail hiring.

So far, job growth has been surprisingly strong this year despite the hurdles, averaging about 200,000 a month, up from 182,000 in 2017.

More:#MeToo one year later: Cosby, Moonves fall, sex harassment fight at work far from over

More:Gas prices nearing highest levels in four years, adding to calls to repeal gas taxes

Wage growth slows a tad

Average hourly earnings rose 8 cents to $27.24, lowering the annual gain to 2.8 percent from a nine-year high of 2.9 percent in August.

Goldman said the hurricane may have artificially inflated hourly earnings by trimming many workers’ hours without necessarily reducing their pay. Over the longer term, faster pay increases could lead the Federal Reserve to raise interest rates more briskly to prevent a spike in inflation.

Market reaction

There were enough positives in the jobs report, such as the continued decline in the unemployment rate and upward revisions of jobs created in July and August, to push long-term bond yields up again to fresh seven-year highs and pressure stocks.

The 10-year Treasury, which climbed to nearly 3.25 percent, closed at 3.24 percent, its highest level since May 2011.

"The sharp rise in bond yields has investors concerned," says Thorne Perkin, president of Papamarkou Wellner Asset Management in New York.

Investors fear that interest rates will keep climbing higher and begin to slow economic growth.

Stocks sold off for a second consecutive session, with the Dow Jones industrial average tumbling 180 points, or 0.7 percent, to close at 26,447. The Dow slid nearly 201 points Thursday when the 10-year government bond yield initially hit a seven-year high.

Industries that are hiring

Professional and business services led the job gains with 54,000. Health care added 30,000; transportation and warehousing, 24,000; construction, 23,000; and manufacturing, 18,000.

Besides the 17,000 job losses in leisure and hospitality, retailers, which are struggling as shoppers increasingly buy products online, shed 20,000 jobs.

African-American unemployment drops again

The unemployment rate for African Americans fell sharply for the second consecutive month, from 6.3 to 6 percent, the second lowest on record behind May’s 5.9 percent. The worker shortages are giving more opportunities to blacks and other disadvantaged groups that have had a tougher time finding jobs.

What it means

On its face, the report was largely a clunker, with just 134,000 jobs added. But there are several mitigating factors. Hurricane Florence likely reduced employment in the Carolinas. And Labor has routinely underestimated payroll gains in September, only to subsequently revise them higher.

Also, job gains for July and August were revised up by 87,000, more than offsetting September’s weak performance.

As a result, the Fed is likely to shrug off the disappointing jobs total, especially with unemployment falling to a nearly 50-year low, and raise its key rate in December for a fourth time this year. Tumbling unemployment should put further upward pressure on wages and prices, and the Fed is trying to prevent a surge that weighs on middle-class U.S. households.

Contributing: Adam Shell