U.S. job gains slowed in September and many Americans quit looking for work, suggesting the economic recovery is downshifting as the country struggles without a COVID-19 vaccine or fresh government aid.
Non-farm payrolls increased by 661,000 following an upwardly revised 1.49 million advance in August, the Labor Department said Friday. That compared with the median estimate of economists for a gain of 859,000.
The unemployment rate fell by more than forecast, dropping 0.5 percentage points to 7.9%, though the labor force participation rate declined by 0.3 points to 61.4%, with the decrease particularly pronounced among women.
The report, the last before November's presidential election, reflects a sizable decline in local education jobs, while gains in retail and temporary workers slowed. What's more, persistently high jobless claims, along with this week's announcements of tens of thousands of layoffs, also indicate widespread economic pain.
Lawmakers remain at odds over further stimulus to help jobless Americans and small businesses, though the latest numbers could add pressure to agree on a package.
"A drop in participation is unequivocally bad for the labor market outlook," said Sarah House, senior economist at Wells Fargo & Co. "It has the potential to prolong the overall recovery as workers are more disengaged with the labor market."
Also, weak gains in average hourly earnings — which rose a less-than-expected 0.1% in September from the prior month — is "another land mine for the spending of consumers going forward given overall slower job growth" and fading fiscal support, Ms. House said.