U.S. job growth slowed sharply in September, likely as Hurricane Florence depressed restaurant and retail payrolls, but the unemployment rate fell to near a 49-year low of 3.7 percent, pointing to a further tightening in labor market conditions. 

The Labor Department’s closely watched monthly employment report on Friday also showed a steady rise in wages, suggesting moderate inflation pressures, which could ease concerns about the economy overheating and keep the Federal Reserve on a path of gradual interest rate increases. 

Nonfarm payrolls increased by 134,000 jobs last month, the fewest in a year, as the retail and leisure and hospitality sectors shed employment. Data for July and August were revised to show 87,000 more jobs added than previously reported. 

The economy needs to create roughly 120,000 jobs per month to keep up with growth in the working-age population. 

Economists polled by Reuters had forecast payrolls increasing by 185,000 jobs in September and the unemployment rate falling one-tenth of a percentage point to 3.8 percent. 

Fed Chairman Jerome Powell said on Tuesday that the economy’s outlook was “remarkably positive” and he believed it was on the cusp of a “historically rare” era of ultra-low unemployment and tame inflation. 

A robust labor market is underpinning the economy and together with high savings could support consumer spending as the stimulus from the Trump administration’s $1.5 trillion tax cut package fades. 

The Labor Department said it was possible that Hurricane Florence, which lashed South and North Carolina in mid-September, could have affected employment in some industries. It said it was impossible to quantify the net effect on employment.