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The U.S. unemployment rate reached an important milestone in September. It dropped to its lowest level in nearly 50 years. It's now 3.7 percent according to the government's monthly employment report. Today's news is a big positive for many workers but a challenge for businesses. NPR's John Ydstie has the story.
JOHN YDSTIE, BYLINE: Sarah House, a senior economist at Wells Fargo, says it's hard to overstate the significance of the super-low unemployment rate.
SARAH HOUSE: I think it's a huge deal.
YDSTIE: And House says the lowest unemployment rate in half a century has businesses scrambling.
HOUSE: The top concern we're hearing from employers is they can't find workers.
YDSTIE: That could limit their ability to grow their companies and put a drag on the overall economy. But House says the historically low jobless rate is a positive for many workers.
HOUSE: It also of course has some significant implications for wages.
YDSTIE: There are signs that wage growth is finally picking up as employers are being forced to boost pay to attract and keep workers. Economist Dean Baker says low-wage workers are among those benefiting partly because many cities and states have raised minimum wages. The September jobs data showed average wages growing at just 2.8 percent over the past year, but lower-income workers experienced much bigger gains.
DEAN BAKER: 4.3 percent over the last year. So some of that's minimum wage laws, but I think some of that is the tightening labor market.
YDSTIE: And Baker says the super-low unemployment rate is helping those at the bottom of the economic ladder finally get a toehold on the first rung.
BAKER: When you start to get the unemployment rate down this low, the people who benefit are disproportionately those at the bottom. So you're seeing people that have historically not been able to get jobs or at least recently not been able to get jobs - the market's opening up to them.
YDSTIE: Black teenagers are a good example. The black teen unemployment rate hit a record low in September. That's the good news. The bad news is that it's still above 19 percent. And that's why Baker believes the Federal Reserve should not panic and start raising interest rates more rapidly to keep the economy from overheating.
So who should get the credit for engineering this low unemployment rate? The White House took some credit today, touting President Trump's policies on deregulation, tax cuts and trade. Former President Obama also gets some credit for reducing the unemployment rate by more than half during his administration. Baker, who's senior economist at the Center for Economic Research and Policy, says both administrations have a case, but...
BAKER: The Fed is really the hero here.
YDSTIE: Baker says remember that just four years ago, the consensus among Fed policymakers was that once the unemployment rate fell below 5 1/2 percent, inflation pressures would build.
BAKER: A lot of them wanted to raise interest rates. They said, you know, look; the unemployment rate's getting too low; we're going to have a problem with inflation.
YDSTIE: But former Fed chair Janet Yellen said, let's wait and see what happens. And that's what the Fed did. Finally, it began raising rates gradually and has continued that pace under the Fed's current leader, Jerome Powell.
BAKER: If you had followed the view of many people on the Fed and many other economists, they would have started to slam on the brakes as the unemployment rate got around 5 percent, and they never would have allowed it to get this low.
YDSTIE: And Baker says that would have meant millions of people might not have gotten the jobs they now have. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.