US job growth increased moderately in September, with the unemployment rate dropping to near a 50-year low of 3.5 per cent, which could assuage financial market concerns that the slowing economy was on the brink of a recession amid lingering trade tensions.

The Labor Department’s closely watched monthly employment report on Friday, however, showed monthly wage growth was unchanged and manufacturing payrolls declined for the first time in six months, and the retail sector continued to shed jobs.

The report came on the heels of a string of weak economic reports, including a plunge in manufacturing activity to more than a 10-year low in September and a sharp slowdown in services industry growth to levels last seen in 2016.

With signs that the Trump administration’s 15-month trade war with China is spilling over to the broader economy, continued labour market strength is a critical buffer against an economic downturn. The US-China trade war has eroded business confidence, sinking investment and manufacturing.

Nonfarm payrolls increased by 136,000 jobs last month, the government said. August data was revised to show 168,000 jobs created instead of the previously reported 130,000 positions.

The initial August job count was probably held back by a seasonal quirk related to students leaving their summer jobs and returning to school. Economists polled by Reuters had forecast payrolls would increase by 145,000 jobs in September.

Sharp drop

Regardless of the continued moderate employment growth and sharp drop in the jobless rate, economists expect the Federal Reserve to cut interest rates at least one more time this year, given the trade policy uncertainty.

Washington announced this week tariffs on aircraft, other industrial products and agricultural products from the European Union as part of a World Trade Organization penalty award in a long-running aircraft subsidy case. Trade experts expect the EU will impose tariffs on US goods next year over subsidies for Boeing.

The US central bank cut rates last month after reducing borrowing costs in July for the first time since 2008, to keep the longest economic expansion in history, now in its 11th year, on track. Growth estimates for the third quarter range from as a low as a 1.3 per cent annualised rate to as high as a 1.9 per cent pace. The economy grew at a 2 per cent pace in the second quarter, slowing from a 3.1 per cent rate in the January-March period.

Job gains

September’s job gains were below the monthly average of 161,000 this year, but still above the roughly 100,000 needed each month to keep up with growth in the working-age population. The two-tenths drop in the unemployment rate from 3.7 per cent in August pushed it to its lowest level since December 1969.

Despite the tight labour market, average hourly earnings were unchanged last month after advancing 0.4 per cent in August.

Private payrolls increased by 114,000 jobs in September after rising by 122,000 in August. Manufacturing shed 2,000 jobs last month, the first decline since March, after hiring 2,000 workers in August.

- Reuters