CNN
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US job growth surged in September, blowing past expectations and providing solid reassurance for the ongoing stability of the labor market.
Employers added an estimated 254,000 jobs in September, according to data released Friday by the Bureau of Labor Statistics. That’s a much higher tally than August’s monthly total (which was upwardly revised to 159,000) and it smashed economists’ expectations for a 140,000-job gain.
The unemployment rate dropped to 4.1% from 4.2%, the BLS report showed.
“We had a bounce-back now in September from what were relatively sluggish numbers in July and August,” Brian Bethune, economist and professor at Boston College, told CNN. “So it looks like we’re still on track. The economy is expanding and we have a very high probability of achieving a soft landing (of reining in high inflation without triggering a recession).”
Robust service-sector hiring — particularly across the health care (+71,700) and leisure and hospitality (+78,000) industries — drove last month’s job gains. Service industries accounted for 202,000 of the monthly gains.
Hiring was more muted across goods-producing industries. Although the construction sector added 25,000 jobs last month (a pace that exceeded pre-pandemic averages), the manufacturing sector, which employs close to 13 million people, downshifted very slightly and logged a loss of 7,000 jobs.
The Federal Reserve, now keenly focused on protecting the labor market as high inflation appears to have been tamed, is closely scrutinizing employment data for any signs of weakness.
September’s report was anything but.
“A truly monster jobs number today,” Chris Rupkey, chief economist at FwdBonds LLC, wrote in commentary issued Friday.
“The economic expansion remains on course for now,” he wrote. “The outlook for the economy in the months ahead is quite favorable, according to the September jobs report. The economy could end the year on a high note after weathering the growth and employment markets scare a couple of months ago.”
The job market has cooled significantly during the past year as it settled back into balance following the pandemic whiplash. It has also slowed as the central bank’s inflation-fighting interest rate hikes slowly fed through to all the crevasses of the economy.
As job gains dropped off from their once breakneck pace, economists were quick to note that the labor market was merely slowing and not at risk of imminent collapse.
The underlying fundamentals were solid, they said, noting how high shares of the population were employed and that the unemployment rate ratcheting up was a reflection of more people looking for jobs versus losing them.
Although anxiety spiked following a weaker-than-expected July jobs report coupled with a drastic downward annual employment numbers revision, August’s solid job gains and Friday’s report — which included upward revisions to both July and August — should put those concerns to rest, Elise Gould, senior economist at the Economic Policy Institute, said in an interview.
“The labor market is strong,” she said. “When we compare it to four years ago, during the pandemic, it’s clearly much stronger; but even when you compare it to 2019, before the pandemic began. Real wage growth is up, a lot of jobs have been added.”
Average hourly earnings grew 0.4% for the month, bringing the annual rate up to 4% from 3.9% seen in August, according to Friday’s report.
Through September, the US has added an average of 199,000 jobs per month, which is below the 251,083 jobs added on average last year but still outpaces pre-pandemic gains, BLS data shows. The US also remains in a period of historic employment expansion: With September’s gains, the economy has seen positive job growth for 45 months, matching the fourth-longest streak on record.
While people, by and large, are more likely to have a job and more likely to have higher wages, that doesn’t mean there isn’t still pain in the labor market or within household finances, Gould said. But the trajectory has been one of improvement, she noted.
“Nominal wages have been rising faster than inflation for at least 16 months in a row now,” she said. “When you compare back before that inflation spike, back to 2019, real wages are up and their purchasing power is up, so living standards are increasing.”
With inflation moving closer toward the Fed’s 2% target rate, the central bank has shifted its focus to ensuring the other side of its dual mandate — employment — remains healthy.
Last month, the Fed surprised with a jumbo-sized, half-point rate cut.
Noting that the labor market was in “solid condition,” Fed Chair Jerome Powell said at the time that the “intention with our policy move today is to keep it there.”
While there’s no direct cause between the half-point cut and September’s shockingly strong job gains (monetary policy actions are slow-moving beasts), Friday’s report is likely more a reflection of the lower interest rates to come.
“The move by the Federal Reserve was a positive signal, because it’s basically said that we’ve crested in terms of rates, and there’s some relief in terms of lower rates coming down the pipeline, especially for small business,” Bethune said. “If they were holding back on hiring because they didn’t know exactly the path of where interest rates were going a few months ago, now they’re saying, ‘We see relief on the horizon; we see our borrowing rates coming down, so we can go ahead and do some of the hiring that we had delayed for a couple of months.’”
Last month’s job growth also should go a long way in eliminating any need for urgency from the Fed, Josh Hirt, senior US economist at Vanguard, told CNN.
“I think that [the Fed] will still continue with a relatively deliberate plan of rate cuts,” Hirt said. “This would remove the strong case for moving more aggressively. … But, I think there’s a pretty high bar for them to pause altogether, given what they’ve started.”
The Fed’s next policymaking decision is due out November 6, the day after the election and a few days after the October jobs report is released.
It’s possible that the October employment report could be a lot noisier than typical, as the employment figures could be depressed by the ongoing strike of Boeing workers as well as those displaced by the devastating and deadly Hurricane Helene.
However, the distortions could be less severe than initially expected: Late yesterday, an agreement was reached and the massive dockworkers strike was suspended to allow for further negotiations.
