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Friday, 6 October, 2000, 13:32 GMT 14:32 UK
US jobless at 30 year low
Construction worker
The number of US construction workers rose by 30,000 in September
The US labour market showed unexpected strength in September, raising fears that inflationary pressures may prompt a rise in interest rates.

The US unemployment rate fell to 3.9%, equalling April's 30-year-low, the Labor Department reported on Friday.

Analysts had expected the rate to remain unchanged from a figure of 4.1% in August, when the US economy shed 91,000 jobs, according to revised figures.

But confirmation that the number of jobless was again shrinking raised concerns that employers may need to boost wages to fill vacancies, so feeding US inflation.

The US Federal Reserve itself warned of inflation dangers in the economy on Tuesday, when it decided to leave interest rates on hold at 6.5%.

Rates rise likely

Wayne Ayers, chief economist at Fleetboston Financial in Boston said there was an "even chance" the Fed would have to increase interest rates before the end of the year.

This reinforces the tightening bias for the Fed. Certainly they have to be worried about labour market tightness

Gemma Wright, Barclays Capital

"This [unemployment] figure is a strong number," he said, and warned that talk of the US economy achieving a 'soft landing' was "premature".

Gemma Wright, regional director for Barclays Capital in New York said the fall in unemployment was "certainly not going to alleviate concerns for Fed about tight labour markets and the pace of economic activity.

"This reinforces the tightening bias for the Fed, she said."Certainly they have to be worried about labour market tightness."

Rising oil prices may also prompt workers to be "more militant" about pay rises, she warned.

Slow acceleration

But analysts took heart that a 0.2% rise in hourly earnings in September was only half the rate recorded the month before.

We're putting a lot of people to work but there is no acceleration of wage rates

Carol Stone, Nomura Securities

"We're putting a lot of people to work but there is no acceleration of wage rates," said Carol Stone, deputy chief economist at Nomura Securities in New York.

"That is a healthy development."

Wednesday's figures, which do not include agricultural labour, show the US workforce expanded by 252,000 in September.

Manufacturing decline

The number of construction workers grew by 30,000, while services sector saw payrolls rise by 289,000.

But the manufacturing sector, which shed 117,000 posts in August, showed further shrinkage, with 66,000 jobs lost last month.

The number of government jobs fell by 36,000.

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03 Oct 00 | Business
US rates unchanged
14 Sep 00 | Business
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08 Aug 00 | Business
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