U.S. payrolls rose by 110,000 in September

updated 3:47 p.m. ET Oct. 5, 2007

WASHINGTON - Fears that the country could slide into a recession eased in September as employers created the most jobs in four months and workers’ wages grew solidly. The unemployment rate crept up to 4.7 percent, the highest in over a year but still low by historical standards.

The tally of 110,000 net new jobs generated in September clearly heartened investors and analysts. Yet what they really took comfort in was the revelation that the job market — a main pillar for the economy— didn’t crack under the pressure of a painful credit crunch and housing slump in August after all.

The Labor Department’s fresh snapshot of employment conditions around the country released Friday showed that the economy actually created 89,000 jobs in August.

That was a huge and crucial turnaround from the loss of 4,000 jobs — the first decline in four years — reported a month before. At the time, that news had sent Wall Street into a nosedive, stoked fears the economy was heading toward recession and was seen as cementing the Federal Reserve’s decision to lower interest rates.

To be sure, the ill effects of the housing and credit problems have hurt some employers, slowing national job growth this year. But the situation is nowhere near as dire as many were led to believe from the initial August employment report.

“We are on much sounder footing,” said Carl Tannenbaum, chief economist at LaSalle Bank. “To be fair, it is clear the pace of monthly job creation has slowed and the unemployment rate is creeping higher but neither measure is indicative of an imminent recession, which was the scenario on everyone’s lips just a month ago.”

The main reason behind the turnaround in the August payroll figure? A big gain in government employment, especially in hiring teachers at local schools.

The bump up in the unemployment rate from 4.6 percent in August came as hundreds of thousands of people — perhaps feeling better about their prospects — resumed job searches.

The new rate of 4.7 percent, the highest since the summer of 2006, is still considered low by historical standards. After the country’s last recession, in 2001, the unemployment rate peaked at 6.3 percent. More than two decades ago, for example, civilian unemployment went over 10 percent as the economy suffered through deep downturns.

President Bush, coping with record-low approval ratings for his handling of the economy, welcomed the new employment figures.

“I am really pleased with the economic news, but I don’t take good news for granted,” Bush said. “I understand that people are worried about their mortgage payments, or concerned about sending their child to college. I know that people are concerned whether or not they’re going to have enough money to meet their needs,” he said. Bush called on Congress to keep taxes low.

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